Sharpest market rotation in over a decade: Kardinia Capital
The market movement following the announcement of a COVID-19 vaccine was “a violent rotation” and the sharpest in over a decade, according to Kardinia Capital’s Kristiaan Rehder.
Markets rose on the days of the Pfizer and BioNTech announcement as they were optimistic of a return to normality thanks to a successful vaccine. This was followed by subsequent successful vaccine trials from Moderna and from Oxford University and Astrazeneca.
Rehder said he had been already purchasing stocks for his Bennelong Kardinia Absolute Return fund which he expected would do well when restrictions were eased.
Rehder said: “We have been accumulating ‘reopening’ stocks in the portfolio and these were up 6% on the day of the announcement while our ‘lockdown’ stocks were down 8%.
“The violent rotation we saw on the day of the announcement with a 14% differential, I haven’t seen a rotation to that extent in 14 years of running this fund. This will not be a one-day event, it will persist into 2021. There is a lot to be excited about in 2021.”
Examples of reopening stocks that Rehder had been purchasing included those focused on travel and leisure, sectors which had been hindered by the restrictions imposed by lockdown, border closures and social distancing.
“We have bought Qantas as there is huge pent-up demand [for travel], Flight Centre, Sydney Airport and Star Entertainment Group. There is momentum for things to open up, restrictions will become more targeted and this will provide a tailwind,” he commented.
Since the Pfizer announcement on 9 November, Qantas and Sydney Airport were both up 14%, Flight Centre were up 12% and Star was up 7%.
Star Entertainment had already been a positive contributor to the Kardinia fund, contributing 37 basis points to performance during October, according to its latest factsheet.
According to FE Analytics within the Australian Core Strategies universe, the Kardinia Absolute Return fund lost 0.81% over one year to 31 October, versus returns by the absolute return sector of 0.88%.
Share price performance of four stocks versus ASX 200 over three months to 23 November 2020
AUTHOR
Laura Dew
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