Author: Hugh Dive

• January proved to be a very volatile month dominated by macroeconomic news such as a short squeeze in a troubled US small capitalisation company GameStop, rather than company fundamentals as companies were in blackout before the February reporting season. Most global markets finished in negative territory after a sell-off in the last week of January.
• The Atlas High Income Property Fund declined by -2.1% in January on general market sentiment rather than investment fundamentals. Atlas is looking forward to the February profit season which we expect will show both a continued improvement in the financials of the Trusts that we own and that management will guide to higher distributions through the rest of 2021.
• Twelve months ago bank 180-day term deposit rates were at 1.25% a return that seemed quite shockingly low at the time, but now looks relatively healthy. Throughout the past year, term deposit rates have fallen further to be between 0.2% and 0.4%, significantly below the inflation rate of 1.5%. 2020 was challenging for property investors as share prices fell based on the false assumptions that rents won’t be collected and that vacancies would skyrocket as large numbers of corporations slid into bankruptcy. In 2021 we see that rent-collecting trusts offering stable distributions significantly above the cash rate will be re-rated higher by investors.  

Go to Monthly Newsletters for a more detailed discussion of the listed property market and the fund’s strategy going into 2021.

Reserve Bank Australia to set off raging bull market

MST Marquee’s Hasan Tevfik said the cheap money would prompt investors to charge into stocks over bonds and set mergers and acquisitions alight. “RBA stimulus increases the possibility of a raging bull market in equities. The extreme financial repression, which the RBA is trying to orchestrate, should be explosive for debt-financed M&A,” Mr Tevfik said.

• After strong gains in November, December was a quiet month for both listed property and the wider ASX.  Positive news on both vaccine roll-outs and Brexit was outweighed by further short-term lockdowns in Australia and fears of a mutated virus strain originating in the UK spreading around the globe.
• The Atlas High Income Property Fund declined by -0.4% in December despite the absence of any new company-specific news.   Despite experts in the press in early 2020 forecasting minimal to no distributions this year; of the ten trusts held in the Fund that were expected to declare distributions at the end of December, all ten paid distributions with most unchanged from what was paid in December 2019.
• The Fund declared a quarterly distribution of $0.032 per unit for the December Quarter. The distribution was paid to investors in early January.  

Go to Monthly Newsletters for a more detailed discussion of the listed property market and the fund’s strategy going into 2021.

Ghosts of dotcom boom in tech valuations

“The maths tells us in aggregate there will be considerable disappointment. But also, like 1999, the more interesting thing is the opportunity in companies that are not part of the mania. In 1999, the sectors being shunned were labelled the old economy. Today the shunned sectors include emerging markets and cyclical stocks,” Isles says.

• November saw a significant recovery in global markets which rallied on the news of two successful trials of Covid-19 vaccines, as well as the view that a constrained Biden Presidency will be positive for the US economy, with a Republican-controlled Senate delivering both an effective stimulus plan, but limiting radical legislative change.
• The Atlas High Income Property Fund gained 12% in November, a pleasing outcome.  2020 has proven to be a very volatile year for real estate, with the dire predictions in March that office towers, shopping centres and toll-roads will become little used redundant assets proving to be incorrect.
• In an environment where interest rates are close to zero, we continue to see the market will re-rate property trusts that can deliver a stable stream of dividends to investors.

Go to Monthly Newsletters for a more detailed discussion of the listed property market and the fund’s strategy going into 2021.