At Seneca, we believe that at the core of any relationship is trust. And that trust is earned through consistent excellence and courageous transparency.
Having spent many years working at large organisations, we learned that it’s not the institution that our clients trust, but the people who work there every day. It’s about the careful consideration of each individual client’s unique needs and consistent application of the advisor’s expertise to the changing economic conditions.
As the CFO of one of the world’s leading specialist natural resources investors, and after having employed Luke in a previous role, I’ve been thrilled with the efficiency, capability and service-offering Seneca have been able to offer my SMSF. Relative to the conflicted banks and standard ‘stockbrokers’ they provide me with unique investment opportunities, considered financial advice and most importantly, really tailor their advice to my circumstances and investment preferences. I think their innovative approach is set to really corner the market.
Rob Bishop - CFO, AMCI Investments Pty Ltd
Luke and the team at Seneca have been instrumental in driving returns for our SMSF in recent years. As the CEO of one of Australia’s most innovative organic fertiliser company’s, whilst I’ve been busy operating our business, Seneca has been able to provide us with a diversified set of direct and indirect investment opportunities, provide timely and strategic advice and educate us on our behavioural biases, resulting in excellent compounding returns. We’ve been strong supporters of Seneca since day 1 and enjoy the high-touch, often daily interactions we have with the team and appreciate the respect they show us and our money. We look forward to a long associate with Luke, John, Victoria and the rest of the team.
Anton Barton - Executive Chairman, BioAg
As retirees, the staff at Seneca have done a wonderful job managing our super fund and our additional family financial assets. Their attention to detail, willingness to go the extra mile and friendship is something we value immensely.
Stan W. - Family Office, VIC
The team at Seneca are a refreshing mix of capital markets expertise and client-centric wealth and investment advisory. They have an ability to deeply and quickly understand equity capital market transactions and work with the corporate advisor, such as Cadmon, to devise a client-focused, favourable deal structure, find the appropriate investors and support a company from its first external capital injection through the various stages of development. We continue to enjoy working with Luke, John and the team.
Cameron Low - Managing Director, Cadmon Advisory
Saturday 17 Oct 2020
The ASX 200 up another 1.22% this week, with the mid caps industrials leading the way (suits me!)
This morning’s weekly note is bought to you by the two coffees my exceptionally patient partner Claire made me, so I’d suspect I’ll be a bit nicer this week. Sorry to the one guy last week who unsubscribed after I clearly offended his sensibilities, I was just trying to help.
Thanks to the 20-odd newbies for signing up and the readers who emailed, called and text’d me on the back of last week’s note. Writing this thing every week gets more challenging as our business grows so getting the occassional positive comment or share on social media strokes the ego adequately enough to keep me going.
As a heads up though, I’m going to write up to c. 15 December and then I’m not doing it again until late Jan/Feb, long time readers will know this is my usual ‘downtime’.
The ASX200 kinda “broke out” this week, with the market breaching the range of 5800-6200 points for the first time since COVID-19 hit the global financial markets. I could run through 3 or 4 really bullish technical indicators that went off in the past week (golden cross, MA uptrends etc.) but who cares… it’s all pointing in one direction.
And let’s face it, I’m not much of a chartist and primarily use them to make me feel better/validate my pre-existing views #confirmationbias.
It was actually a surprisingly news-packed week so rather than wax on (again!) I’ll just get into the stocks/stuff you should know.
Chinese ban on Austrailan thermal coal
Not sure if you caught it during the week but apprently, China has banned imports of Australian thermal coal (subscription required).
As you all probably know, I’m long both Whitehaven (WHC) and New Hope Coal (NHC) and think there’s a substantial investment opportunity in both.
I’ve seen similar tactics from the Chinese in recent history, and at those times, the Chinese haven’t been willing to ‘augment’ the seaborne coal price (by removing a big chunk of the demand) for any extended period of time (less than 9 months).
I think most coal traders will tell you that the Chinese have been trying to prop up their own, much more expensive, domestic production for many years, limiting the overall import volumes of Aussie coal in any given period, lending money for free, offering them ridiculous payment terms on invoices for power, water, tax etc.
The problem for them is seaborne (Australian) coal is significantly better quality and can be dug up cheaper (and subsequently sold sustainably) than Chinese coal. So whenever the restrictions are lifted or the quota periods ‘roll over’ we see record high imports (as we did in Mar-Apr) as traders arbitrage the domestic price and seaborne price gap #freemoney.
Don’t be surprised to see a few of the coal marketing “dark arts” come out to get around/exploit this ban.
Friday 09 Oct 2020
The ASX 200 had a really nice week, recovering quickly on Monday from the “Trump gets COVID19” sell-off on Friday afternoon last week and since adding another c. 200pts. The ASX 200 closed flat on the day at 6102.
This evening’s weekly note is bought to you by my third Roku Gin & Tonic, courtesy of my best mate and loyal reader Ashok who bought me a bottle for my birthday back in August (31st for those who want to send me gifts or cash next year!)
Ashok is responsible for half of ANZ Insto Property reading this note each week so many thanks for your ongoing support #darknessbrothers. If you’re in the market for a $500m+ senior debt refinance for your ASX-listed property trust, Ash is the man to talk too.
Small and mid cap stocks had a huge week of outperformance, while the top 50 lagged. Energy, tech, financials and materials (all the high beta cyclicals) leading the way. The equity risk premium (ERP) is going lower (as we’ve discussed ad nauseum.)
I’m telling you once, twice, three times and silent…. this market is going higher.
That said, the ASX200 has gone sideways since the start of the financial year. This is the best stock-picking market I’ve ever been apart of… if you can’t find undervalued companies now you won’t ever find them.
As a result, our SMA model portfolio is doing exceptionally well.
As of Thursday’s close, +10.14% gross returns since inception vs ASX 200 Accumulation Index +3.82% (that’s 6.32% outperformance before fees)
We had a huge week of inflows this week, very appreciative of all the clients getting right behind the product and thanks to the new clients for putting their faith in us.
….. we want more investors!
And let’s face it, we are doing pretty well relative to the peer group on a 3 month basis… Here’s a chart of every other ASX 200 benchmarked manager in Australia… that’s us in blue and the benchmark in pink. Numbers courtesy of our friends at Lonsec. For the smart arses in the group, Pegana and Ausbil are ahead of us (for now…)
Sunday 04 Oct 2020
Donald Trump caught COVID19 and sent the market into a bit of a mini-spin, falling about 100 points fairly rapidly on Friday afternoon. I’d be surprised if the market wasn’t up a fair bit on Monday.. futures pointing up 1.16% at the moment.
US Markets were also down on Friday night, S&P 500 down 0.96% and the NASDAQ down 2.22%. Quality and growth names the worst affected. Worst performers were Tesla (TLSA, -7.38%) and DexCom (DXCM, -7.08%).
Locally, our market closed the week down almost 3%, dragged lower by resources.
Last week we talked about being short iron ore, long everything else in resources. For context, here’s a chart. FMG & RIO have both outperformed the rest Mining-ex-energy index I’ve created (clearly by different degrees) this year.
Over the past 4 weeks, that outperformance has started to break down.
I reckon this continues. Iron ore price is unsustainably high (even though the fines price CFR Qingdao was up 5% last week, US$123.47/t.)
More relevant, is I’m building high conviction in this coal trade, both metallurgical and thermal. Nice pickup from Citi shows current arbitrage opportunity of buying seaborne coal and selling locally in China. This doesn’t last – and I saw it back in 2013/2014 when my job was modelling the supply/demand of these coals. Seaborne met and thermal coal prices to rise, WHC, NHC, CRN etc to outperform.
I was pretty surprised and stoked to be selected as one of the 10 finalists for Independant Financial Adviser “Investment Adviser of the Year” award. I find out if I win at the awards night on 29 October, which they are doing via Zoom this year.
Friday 25 Sep 2020
The ASX 200 up 75pts as I type this at about 3pm on Friday afternoon. Market was pretty flat all week until today’s move higher, primarily driven by a big rally in the banks following the easing of the responsible lending legislation introduced by the Rudd-Gillard Government.
I won’t cover that too much, just read about it in the papers (pick your preferred bias below):
Australian Financial Review
As we discussed a few weeks ago, the ASX 200 needs the banks to move higher to break out of the current range, this might be a catalyst for a real re-rate. As you can see below, it’s the non-resources stocks (green) lagging resources (red) at the moment, even when you normalise for dividends (like I’ve done below).
Our long-short trade for the past 8 weeks or so has been long WBC, NAB and ANZ (“the other 3”), short CBA. Played out beautifully so far.
Average return on the “other 3” is an increase of 2.22%
CBA down 6% (after dividend reinvestment)
Speak of long/short, I think there’s a nice trade setup in resources at the moment as well, short iron ore, long everything else.
I’ll setup 2 portfolio’s on Factset, the iron ore stocks (RIO, FMG) vs the ASX 300 Resources Index ex-oil and iron ore and we can take a look in a few weeks.
Not so humble brag
Vulcan Energy Resources (VUL)… signed a senior Tesla executive today and the retail investors loved every bit of it. Stock has doubled in 30 days. Intra day high $1.35.
We a long the stock from the placement at 40c.
Friday 18 Sep 2020
Market is pretty flat today so I’m going to bang this note out at about 1pm and enjoy the good weather coming this weekend. ASX 200 trading at 5884, flat on yesterday’s close, and up fractionally on this time last week (+0.44%).
Resources outperformed pretty strongly this week, though as you’ll see later, it was the gold stocks that caught a bid. Gold price pretty steady in AUD terms.
Luke on TV
I forgot to put this in last weeks note, but last Tuesday (I think) I went on Ausbiz TV for a few minutes to talk about Vulcan (VUL) and De.Mem (DEM). I think I’m on every 2 weeks now so once I get the confirmed timeslot, I’ll let you all know so you can watch live if your interested.
Speaking of Vulcan Energy Resources (VUL)… pretty happy with the 40c placement we cornerstoned back in June (sophisticated investors only) with the stock currently trading over $1 last week for the first time (currently 91c). Seneca owns the stock as a house and for clients, and readers of this note would’ve already seen the interview I did with the CEO Francis a few months back.
I saw a couple of blokes on ausbiz trying to give Vulcy a few pot shots – too many buzzwords they reckon – If you want to watch them fumble around in the dark here’s the link (you might need to login to view it.)