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The CC Sage Capital Absolute Return Fund returned 2.78%* in January, outperforming the RBA Cash Rate which returned 0.37%.
The CC Sage Capital Equity Plus Fund returned 5.78%* in January, outperforming the S&P/ASX 200 by 1.21% which returned 4.57%.
The strongest contributors to performance were Sage Groups#, Growth, with Defensives and Resources also strong contributors. None of the Sage Groups were significant detractors, but of those that were, Domestic Cyclicals and REITs were the largest.
Performance in the Growth Sage Group was driven by overweight positions in Telix Pharmaceuticals (ASX: TLX +19%) which was stronger on European approval of Illucix, their core product, and strong sales guidance, CAR Group (ASX: CAR +13%) and an underweight position in Fisher & Paykel Healthcare (ASX: FPH -2%), which underperformed on the risk of being caught up in US tariffs with Mexico being a significant manufacturing hub for them.
In the Defensives Sage Group, an underweight in ASX (ASX: ASX -2%) and an overweight in Aristocrat Leisure (ASX: ALL +11%) added value while in the Resources Sage Group an underweight in Origin Energy (ASX: ORG -4%) added value after a production downgrade and higher costs in Australian Pacific LNG, while an overweight position in Karoon Energy (ASX: KAR +14%) helped after it announced a new share buyback.
In the Domestic Cyclicals Sage Group, detractors resulted from an underweight position in JB Hi-Fi (ASX: JBH +9.5%) and an underweight in Harvey Norman (ASX: HVN +11%) with retailer focused names catching a bid with robust economic data and the possibility of an interest rate easing cycle to begin in Australia.
The Yield Sage Group is worth highlighting despite being a modest net contributor. An index holding of these stocks outperformed the Australian market with financials being strong in January 2025. While we hold underweight positions in several domestic banks, other stocks in the Yield Sage Group have overweight positions, which outperformed even the strong banks.
The Australian equity market began strongly in 2025, more than reversing any weakness in December 2024, part of a global risk-on rally. In US equities, rotation occurred away from some market leaders and measures of stock dispersion rose amidst rapidly changing policies in the US on trade and shifts in market thinking on what the future of AI and related costs will look like.
Inflation has subsided globally to the point where central banks have initiated interest rate cutting cycles, but with easy gains made on inflation and the prospect of global trade wars escalating, the US Federal Reserve has signalled caution on further interest rate cuts, wary of the risk of re-igniting inflation. The outlook for equities remains positive though a key concern is the disconnect between bond and equity markets, with rising bond yields driven by strong US growth, high deficits, persistent inflation, and quantitative tightening. This could challenge growth stocks, especially in technology and healthcare, where valuations appear stretched.
In Australia, long-duration growth stocks have ignored rising interest rates, but a valuation correction is possible. Commodity prices have been rangebound due to China’s slowing growth, with bulk commodities facing long-term headwinds. We favour base metals like copper and aluminium, supported by electrification demand, while lithium is oversupplied but has downside protection. Energy stocks continue to be undervalued and could benefit from geopolitical shifts.
The Australian economy remains strong but faces a two-speed dynamic—older, wealthier generations benefit from higher interest rates, while younger, indebted households struggle. Travel stocks remain attractive, though consumer spending may weaken due to high interest rates and election uncertainty. Banks face limited growth, with competitive mortgage markets and rising costs, making them potential shorting opportunities. We prefer insurers and diversified financials, which offer steadier earnings growth.
The portfolios are constructed using Sage Groups to minimise macroeconomic risk by maintaining low net exposure across diversified, liquid investments, providing potential resilience in an uncertain environment.
Read the monthly reports for additional commentary.
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