This stock report is a must have for anyone looking to know which ASX shares to buy and who wants to improve the performance of their ASX share portfolio.
On a six month and a 12 month basis the model portfolio has outperformed. For the September quarter the model portfolio has underperformed by about 100 basis points off the back of weakness in the banks and the resource companies due to trade tensions.
Occasionally you will get periods of underperformance but this is okay because the first six months of the year were very strong, benefiting from overweight position in the banks, if you remember when the royal commission report was released. We haven’t given it all back and the BCV Portfolio is not meant to be a market timing mechanism. The portfolio has low turnover and fundamentally our views about the economy haven’t changed, which we will drill down on.
BLUE CHIP VALUE ASX SHARE PORTFOLIO
The Blue Chip Value ASX Share Portfolio continues to extend its outperformance of its benchmark, the S&P/ASX 200 Index, generating a return over the past 12 months to 31 May of 14% versus the Index return of 11%. Our Portfolio Manager Sam Ferraro gives valuable advice for building and managing your own portfolio telling you what we are doing now.
ASX SHARE PRICE TARGETS: THEY KEY TO OUR SUCCESS
Our PRICE TARGETS and clear Buy, Sell, Hold ratings have become invaluable for subscribers who depend on our ASX share recommendations to stay ahead of the share market and generate stronger returns from their investments.
Up to 50% of your share portfolio should be invested in the big end of the market and at Under the Radar Report our team of experts help you choose which ASX shares to include in your portfolio. It's really easy to follow and the ratings make it easy for you to know what trades to make.
Set Up Your ASX Share Portfolio: We tell you which ASX Shares to buy.
What is Under the Radar doing with the ASX Banks now?
The whole rationale for being overweight in the banks is that they were historically cheap based on price to book multiples and their strong profitability, or return on equity estimates. On top of that, the increase in capital adequacy requirements from the regulator APRA, meant that they had considerably strengthened their balance sheets. On our valuations, the banks remain good value, but not the “rock bottom prices” we saw in 2018.
In our table of updated recommendations and price targets it shows that National Australia Bank (NAB) rates the highest by a clear margin, followed by ANZ Bank (ANZ) and then Westpac (WBC). The Commonwealth Bank (CBA) remains in the portfolio, but is not as good value. We are comfortable with this being in the portfolio and we’ll explain why. The CBA position is interesting because it has the largest index weight of those four banks, being the largest. From the BCV Portfolio perspective, because we equal weighted the banks at 9% each, our active bet on CBA is actually the smallest. In other words, CBA has the lowest expected return of the banks, but it also has the lowest active weight.
THE ASX SHARE MARKET IS THREE BUCKETS
The best way to think about the Australian share market is in three buckets: resources; financials and industrials. Most Australian active funds would be overweight in the industrials bucket and use either or both underweight positions in resources and financials to fund this.
The BCV Portfolio has been overweight for a long time in the financials bucket and the resources bucket. We funded those two sectors with an aggregate underweight position in the industrial sector. In the past year this has been the right call to make.
Even though the Chinese economy has slowed, resources have held up remarkably well because commodity prices have continued to be strong; while the banks have recovered strongly after weakness during the Royal Commission.
Telstra (TLS) was a drag on the performance 12 months ago. Even though the bottom up fundamentals weren’t favourable (industry dynamics, NBN etc), BCV Portfolio maintained an overweight position because we needed a presence in the industrials bucket. It offered diversification benefits. As it’s turned out, this was the right call. In large part this is because competitive pressures have lessened. Patience really is a virtue in share investing.
Under the Radar's high conviction ASX share portfolio of 15-25 BLUE CHIP ASX shares
Under the Radar's Blue Chip Value Share Portfolio which subscribers to the Blue Chip Value stock report have full access to, at any one time includes between 15 and 25 ASX listed Big Cap stocks.
Use our price targets and our share portfolio to make the most of your ASX share portfolio. Find out what shares to buy now with free access to all our independent share research - scroll down to the blue bar to access it now.
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