Hi all,
Thanks for the pleasure of working with you for another big year. We are so grateful for your continued support and are thrilled with your investment success in 2019. The markets certainly have been very kind which keeps us on our toes, but more on that later.
2019 has seen a few changes here at Fortitude. After nearly six years, Fletch has decided for a change and we wish him all the best for the future. Huw has enthusiastically stepped up into the Advisor position and we’re very excited at the skills and energy he brings to the role. We have no doubt you will be too!
Equally exciting is the huge news of Kylie Jewell joining us as our new Practice Manager, heading up the Client Services team of Fed and Brad. Kylie and her husband have been long term clients of Fortitude, so they know our business very well and the services that you all require. I have no doubt she will be brilliant, with a background of success at blue chip businesses such as Bankers Trust and Ausbil Dexia, as well as running the Jewell household of four, YES FOUR, energetic boys. Welcome aboard Kylie!
With such a great team at your disposal, no task is too arduous so please make use of our resources.
A BIG thank you to the 120 of you who were able to join us in February to help celebrate our 10 year anniversary! It was a really special evening that had it all .. laughter, tears, dancing, topped off with some magnificent karaoke at the end of the night … ‘Khe San’ belted out even better than Barnsey.
You may remember that I actually invited Warren Buffett to the big party .. and YES, he did finally respond! … sending his best wishes stating “Luke, find Berkshire Hathaway a big friendly deal in Australia”. He does have a lazy US$130billion of cash burning a hole in his pocket, so please keep your eyes and ears open … I don’t want to let the great man down (his note, by the way, is framed and drool proof, stationed front and centre in our office if you want to pay homage at your next visit).
It was a busy year for client events, leading off with Ollie and his dad, the legendary Peter Thornhill, running 5 seminars (Behavioural Finance 101) and now offering it across the country (Melbourne, Brisbane, Perth, Sydney) .. all packed to the rafters. Ollie and Peter will continue to roll these out throughout 2020. A day with Peter is an invaluable time investment of yours and an incredible gift for a relevant family member or friend … and NO, once is NOT enough.
We also started the year with an impressive offsite Magellan briefing with CEO & co-founder Hamish Douglass. Other luminaries also generously shared their time, thoughts and wisdom throughout the year, with briefings from Andy Brown (E72), Ash Burtenshaw (GCI) and most recently, Estate Planning specialist lawyer Kerstin Glomb.
We continue to stay close to our preferred investment partners, with updates throughout the year from key management of SOL, BKW, MFG, MFF, BKI, WHF, AFI, ARG, MLT, HM1, OPH and for the seventh consecutive time, BRK (hopefully many more Warren and Charlie .. keep it going).
To the Markets – As at November 2019 month end (ASX200 at 6,846), the snapshot for the ASX200 including dividends for the last 12 months is a whopping 26% return (or 21% increase excluding dividends). You may remember that the starting point for this snapshot on 1 December 2018 was after a multi month selloff post August 2018. In addition, 2019 saw the RBA slash the cash rate from 1.5% at this time last year by a massive 50% via three 25bps cuts, to take it to new record lows of 0.75%. This is of course very positive for sharemarkets.
Despite this backdrop, the 4 major banks were again key underperformers for the year (WBC and ANZ share prices the worst, both off 7%). The star performers were CSL, GMG, WOW, RIO & WES (all with share price increases over 30%, and CSL and GMG increasing 56% and 40% respectively).
We are again very pleased with the performance of your investment portfolios over the longer term, but also over the last year, keeping up with the strong Aussie and International markets. Over shorter timeframes, this is not always the case and should not be expected.
Dividends – You all got a pay rise in 2019! EVERY ONE of our other preferred core investments increased their dividends this year (MFG, MFF, SOL, BKW, ARG, BKI, MLT, WHF, DUI)…. MFG, AFI and BKI the standouts with over 30% increase in dividends this year. Tell that to your investment property loving friends!
Share prices – With the ASX200 nudging all time record highs, up nearly 28% for year including dividends AND franking credits, stellar performers on the same measure included MFG (+114%!), MFF (+33%) and DUI (+30%). There were again no blow-ups or disasters.
The folly of forecasting!
I repeat below from last year’s note on the key themes that were rattling around the water coolers at the time, and what nonsense and non events these turned out to be… except for the Trump tweets that is!
“2019 will no doubt be very interesting. Expect lots of noise and negativity, driven by the press and the market’s reaction to themes such as any US interest rate increases and any flow on effects to Aussie cost of capital (ie out of cycle bank-initiated interest rate increases), over-reaction of banks to the Royal Commission, Australian unemployment level increases & impact on highly leveraged home owners, any further deterioration in our property market and flow on effects from that , Brexit, escalating US/China tension, slowing US growth … and any tweets from the Orange Swan!”
We should all continue to expect, embrace and ultimately take advantage of volatility from future unforeseen events and themes. Good luck trying to predict them.
We can, however, take tremendous confidence in the experienced management teams of our core investments, all of which have significant skin in the game and have sailed through tough times like the ones that will inevitably come .. only to come out the other end stronger and more profitable.
The great Howard Marks from Oaktree Capital gets this year’s quote:
[On the consistent swinging of the pendulum between fear and greed] “The significance of all this is the opportunity it offers to those who recognize what is happening and see the implications. At one extreme of the pendulum – the darkest of times – it takes analytical ability, objectivity, resolve, even imagination, to think things will ever get better. The few people who possess those qualities can make unusual profits with low risk. But at the other extreme, when everyone assumes and prices in the impossible – improvement forever – the stage is set for painful losses. It all goes together. None of these is an isolated event or a chance occurrence. Rather, they’re all elements in a recurring pattern that can be understood and profited from.”
Thanks again for all your ongoing support. We genuinely love getting to know you more and more each year, and we look forward to enjoying many more life experiences with you into the future.
Our very best wishes to you and your family at this fabulous time from the wonder team at Fortitude who make it all happen … Ollie, Huw, Kylie, Fed and Brad.
The best is yet to come!
Luke
