A look back on The Value Strategy's performance so far

A look back on The Value Strategy's performance so far

Rivkin’s recently launched Value strategy has now been running for two months now and it is time to review its performance.

Value is a fundamentals-based strategy that looks at a range of factors to select a portfolio of high performing stocks.

With impeccable timing, the market dropped immediately after we launched the strategy but as we will show, its performance so far has exceeded the market return by a considerable margin.

In this article, we will compare Value to both the broader market and to the Rivkin Blue Chip Strategy to give an idea of how the new strategy has performed on a relative basis.

Rivkin has defined Value to mean stocks whose earnings are likely to be both efficient and sustainable. This is achieved by ranking our stock universe (the ASX 200) based on a measure of earning stability as well as a measure of capital efficiency.

The final selection of stocks is taken from this list and is based on dividend yield. In contrast to the Blue Chip Strategy, however, lower dividend yielding stocks are chosen for the Value Strategy due to their generally higher growth prospects. Further information about the Value strategy can be found by clicking here

The main purpose of this article is to look at the performance of Value compared to both the ASX 200 and to the Blue Chip Strategy. The chart below shows the equity value of each of these benchmarks together with the Value equity curve.


The chart shows that over this time period, the Blue Chip return has followed the ASX 200 index quite closely. This is largely expected as the Blue Chip Strategy holds some of the largest capitalisation stocks in the index and therefore the return should be highly correlated with the index.

The Value Strategy, on the other hand, has a lower degree of correlation with the index which can be seen by the outperformance of Value relative to both the ASX 200 and the Blue Chip Strategy. The unfortunate timing of the start of the strategy can be seen by the decline in both the index and strategy immediately after launch although it also shows the quick recovery of Value in the weeks following the decline.

Since inception, Value has produced a total return of -1.2%*. This includes a small amount of dividends paid although the strategy is not designed to capture a high dividend yield.

Underlying these results is some significant variability in individual stock returns. Altium (ALU), for example, is the best performing stock in the portfolio and currently has an unrealised gain of 30%*. Altium’s gains came after it reported strong half year results although the share price did fade after the initial euphoria of these results.

On the other end of the spectrum, the worst performing stock so far has been Wisetech Global (WTC). Wisetech is currently down 36%* with most of the loss occurring after its half year results.

The gains and losses on the other stocks are more modest and although it is tempting to scrutinise individual stock performances, the most important metric to judge against is the overall portfolio return.

Although the strategy has only been running for a short time, the results are already showing outperformance relative to both the ASX 200 and the Blue Chip strategy.

In addition, the back-tested results of the Value Strategy are very encouraging, showing a 15.5% average annual return.

Signing up to a Rivkin Local membership would give you access to this strategy as well as the four other Local strategies that we run.

Please contact us on 1300 748 546 to obtain more information. You can also click here to watch a complete webinar dissecting the components of The Value Strategy.

*Past performance is no guide to future performance. 

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