POST TRUMP DUMP: DISCIPLIE AND PATIENCE REWARDED
Post Trump Dump Returns Have Been Strong
As we roll into the final quarter of 2025, it’s a good time to reflect on what’s been another eventful but productive period for asset markets, and for your portfolio(s). This is the result of global markets recovering strongly as inflation has continued to ease, confidence in the US Governments direction has improved post the Trump Dump and talk of rate cuts has started to shift from “if” to “by how much and when”.
For our investors who stayed on the course, and particularly for all of you with our globally diversified portfolio tilt, the rewards have been excellent.
Over the 12 months, returns across our core market exposures are as follows:
This outcome represents a very healthy picture, with the clear standout once again being global equities, particularly the US, where earnings have proven resilient and technology leaders continue to power ahead. Adding to this is a broadening of offshore returns, for as we show, they now include Japan and Europe for example while sadly Australian equities continue to lag yet again. It’s a theme we’ve seen persist for several years now and a feature we have discussed in past quarterly reports in depth.
Which is exactly why we diversify: it’s not about predicting which region or sector will lead each year, it’s about ensuring that wherever growth turns up, even if it’s obvious right now the US remains the growth engine of the world, you have an allocation that’s able to participate.
Now, if diversification of exposures is the foundation for our investment house, it’s the ability to selectively add value through direct stock investments that’s the core feature of our investment framework which really differentiates our approach. We don’t buy many, but when the setup looks compelling, we’re happy to take a swing that’s grounded in fundamental conviction when we see an opportunity to enhance returns.
Of course we don’t expect to get them all right, that’s impossible, and we will never try and hide that fact, but the evidence over the past year again demonstrates why this approach remains so powerful.
Our direct equity holdings delivered an average total return of 37.1%.
This strong outcome was driven by several standout performers, notably ZIP +188.5% (still held), Codan +121.3% (now sold), and Life360 +80.6% (now sold). Each reflects very different parts of the market where we identified strong fundamentals and favourable outlooks. Aussie Broadband (still held) also continued to execute strongly as it consolidated its position in the telco communications market.
While a handful of positions detracted, including GQG, AGL and Webjet, the net result clearly demonstrates that our stock selection process highlights the asymmetric payoff that can come from being disciplined and opportunistic. And while it is tempting to look at results like these and think that the key lies in “picking winners”, that’s not really what drives success over the long term.
Our process has always been about building a foundation that compounds. That is core exposure to the market’s return’s globally, not just locally – remember Australia is just 1.63% of the worlds GDP and has a lot of structural issues. And then layering on select opportunities where we believe we can add value. The outcome over the past six years has been consistent: market-like returns from the core and outperformance when conditions have allowed us to lean in.
Australian Equities Exposure
If we extend the above analysis, but this time come down to a more granular timeframe and focus on the 2025 September quarter just gone, it was another strong period for asset markets and this includes the Australian share market, with the ASX200 Total Return Index advancing 4.76%.
As you are already aware, this quarter is also home to the August reporting season which provides your investment team insight into the financial health of corporate Australia, and more importantly, the direct investments held within your portfolio(s).
Pleasingly, we can report that the majority of holdings reported very positive results, which has been the key to driving the outperformance within your portfolio for the quarter.
ResMed (RMD) was the first of your holdings to report in the quarter which detailed a 10% increase in revenue for FY25, up to $5.1bn and a continuance of their margin expansion progress, which resulted in net profit for the business growing 23% to $1.41bn. This was well ahead of the businesses top-line growth and is an excellent outcome for investors. In addition to the extremely strong FY25, management provided a positive outlook for FY26 which gives us confidence to maintain RMD as our largest direct holding. RMD shares advanced a steady 6.9% for the quarter, and we continue to see upside to the current share price with our DCF valuation of around $48 per share.
AUB Group (AUB) also reported strong FY25 results, with underlying net profit after tax rising 17.1% to $200.2 million. Margins likewise continued to improve, underpinned by effective acquisition strategy and operational efficiency. Despite the days of 15% insurance premium growth being behind us, we are confident in AUB’s ability to utilise new acquisitions to continue to grow revenues, with margin expansion being key to driving earnings growth that is well in excess of the market’s average, at what we would consider, much lower risk. We, like you, are surprised by the businesses’ underperformance this quarter but remain confident of the business’s future prospects.
These two positions are now bastions, ballast or the houseboats of your portfolios.
Our speedboats, our much higher growth investments, were the three best performing assets during the quarter, holdings we were able to buy at prices that we considered attractive at the time.
These included Zip Co, Aussie Broadband & Codan, which all outperformed materially.
ZIP Co’s (ZIP) FY25 results were extremely positive, showing a continued breakthrough into US markets, where buy-now-pay-later products remain early on in their adoption cycle and hence provide a long-runway for structural growth. These products make up just 2% of the total payments market in the US, and just 6% of e- commerce compared to 10% here in Australia, and it is this under-penetration in the US which underpins ZIP’s future prospects. And despite the business’s relatively early stage in its lifecycle, US operations now make up over 80% of its earnings. Zip is now up over 200% since our initial purchase at $1.50 per share back in April and we retain conviction that there is more upside to be realized, albeit the mispricing gap we identified has closed quickly.
Codan Limited (CDA) reported an impressive FY25, with revenue up 22% to $674.2 million and net profit rising 27% to $104 million, driven by strong demand in its communications and defence segments. The company highlighted a robust order book and ongoing strategic acquisitions, which provide confidence in the growth trajectory for FY26. CDA shares advanced over 50% for the quarter and a problem arose as the price has well and truly exceeded our valuation. While we maintain a positive view on the business and believe the defence segment will continue to benefit from noteable tailwinds, as relative upside compared to the broader market was limited (in our view), we exited our position in Codan in late September, closing out a 6-month ownership period and a return of 120%. This experience has us wishing that all investments we make going forward turn out like this.
Aussie Broadband (ABB) released FY25 results which were in line with our forecasts, but pleasingly FY26 guidance of 14-21% EBITDA growth exceeded them. The key success of Aussie Broadband’s results was the announcement of a wholesale contract win with Vocus and Tangerine to service another 250,000 subscribers, which will contribute further growth, providing confidence in the business hitting their FY28 targets. We added to our position in ABB post result, and we have continued to see the share price move upwards, closing the quarter with a gain of over 40%. Aussie Broadband remains a key high conviction holding within the portfolio.
AGL Energy (AGL) was our sole disappointment during the August reporting season. Earnings for FY25 met our expectations, however guidance for FY26 was comfortably below what we were forecasting. We made the decision to exit our position in AGL on the day of the results, still managing to lock in a profit of around 14% since our initial purchase. But given the tailwinds behind the business, we are disappointed to not have profited more on this position.
Ansell (ANN) is a position we exited prior to the results due to our concerns around how tariffs may impact the FY25 financials, and FY26 guidance. Your investment team spent hours reviewing the numbers and the businesses’ geographic manufacturing footprint and determined that the likely outcome was that Ansell would produce earnings lower than our previous forecasts.
Now, as the fundamental strategy within this portfolio is to own high conviction positions that we are confident can outperform the market, noting the above, we did not think Ansell fitted this simple criterion.
As it were, Ansell’s results surprised us to the upside (they pulled a magic rabbit out of the hat that’s for sure), and we still don’t quite understand how that was possible, being completely truthful, other than their hedging policies are providing some needed temporary relief.
We still believe there is downside risk to the share price, and we have since seen Ansell shares give up the whole 10% gain on the day of its result to now trade back to where they were at our point of exit.
Why We’re Holding Fewer Direct Positions Right Now
You will all notice that the number of direct stock positions in portfolios at present has come down following the August reporting season. That’s deliberate. As markets have risen, we’ve found it increasingly difficult to uncover truly asymmetric investment ideas, the kind where we are confident that the potential upside meaningfully outweighs the market’s averages.
This has somewhat been a function of prices having moved higher for almost 6 months now, and evidence to us that optimism has taken hold. Numerous good companies we follow or have owned have simply become too expensive to justify holding individually at a meaningful weight, let alone adding.
Another one of the advantages of our approach is that we can act quickly, cleanly and decisively when markets suddenly switch gears, with a technology platform and market-leading institutional order execution that enables us to exit positions across all portfolios the moment our thesis plays out, valuations stretch, or the facts change.
By stepping back into our core portfolio exposures, we’re able to maintain market-like returns while we wait patiently for the next set of opportunities to emerge and it’s a cycle that repeats time and time again: identify high-conviction ideas, act decisively when conditions are right, then retreat to the base when they’re not.
That discipline, knowing when to be active and when to be patient, has taken many decades of experience through all types of market cycles to somewhat master, and is a key contributor to your long-term results and remains central to how we manage your portfolios.
To put it simply: in our view, numerous good companies we follow or have owned have simply re-rated ahead of their fundamentals. Prices have run, optimism has returned, and as much as we enjoy participating in rising markets, we’re far more interested in being positioned for what comes next rather than what’s already happened.
That’s why you’ll see fewer individual stock positions in portfolios right now. When opportunities become scarce and risk/reward skews unfavourably, our preference is to step back into the core, the diversified market exposure that keeps portfolios compounding, and wait patiently for the next wave of ideas to emerge.
It’s an important part of our process:
We’re just as comfortable owning more diversified exposures for a time as we are owning high-conviction names when the setup is right
But, when those asymmetric opportunities reappear, and they always do, we’ll be ready to lean back in decisively.
Until then, we’re happy to let the core do the heavy lifting.
FINAL THOUGHTS
Every year brings its own mix of challenges and opportunities, but our mission doesn’t change: its ultimately to help investors participate meaningfully in the growth of the global economy through various asset markets, without unnecessary complexity, cost, or emotion.
The past 12 months have once again shown that patience, diversification, and disciplined decision-making deliver results. We’re proud of the returns achieved, and even prouder of the trust you’ve placed in us to manage your wealth with care and conviction.
And on that note,
We’ll assume our investors are satisfied, because as they say, no news is good news, and… we rarely hear from many of you!
Looking ahead, we remain optimistic but realistic. Markets have run hard and some would argue too hard. Much of that strength has come from the expected path toward lower interest rates, and continued optimism around Technological changes afoot, particularly in the US, which should continue to support equities.
But it won’t be a straight line (it never is). Earnings expectations are elevated, and even we can’t argue that isn’t a feature of the current landscape.
On that note, there’s talk a-plenty about “bubbles” waiting to burst, but we think the reality is more nuanced. It’s not necessarily a crash that lies ahead, more likely, a period of lower returns and renewed volatility as central banks continue the balancing act between growth and inflation.
Corrections, rallies, rotations, they’re all part of the market’s rhythm. The key is to exploit them when and where possible to enhance long-term returns and not be afraid of them by trying to jump in out of markets (which is impossible and impractical).
It really is that simple.
Having delivered top-quartile results since the start of our investment journey, we’re proud of the consistency, and confident that whatever markets throw our way, even the proverbial kitchen sink, we have the tools, the process, and the temperament to deal with it and, more importantly, to take advantage of it.
Once again, thank you for your continued support and trust.
Russell Muldoon, Portfolio Manager and Bowen Hosking, Equity Analyst