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The CC Sage Capital Absolute Return Fund returned -0.19% in December versus the RBA Cash Rate return of 0.33%.* During the quarter, the Fund returned -0.23% versus the RBA Cash Rate return of 0.91%.*
The CC Sage Capital Equity Plus Fund returned 0.96% in December, underperforming the S&P/ASX 200 benchmark by -0.34% which rose 1.30%.* During the quarter, the Fund returned -1.52%, underperforming the S&P/ASX 200 benchmark by -0.51% which returned of -1.01%.*
Over the quarter, the Sage Groups^ that contributed the most to performance were Domestic and Global Cyclicals while Resources and Defensives detracted.
The largest positive contributor during the quarter was a long position in Rio Tinto (ASX: RIO +20%) which rose as iron ore prices remained elevated above US$100 a ton and copper prices shot up north of US$5.5/lb. Iron ore had been resilient throughout the second half of the calendar year but Rio Tinto shares only started really outperforming during the September quarter when copper rallied up to US$1. We continue to like both Rio Tinto and BHP Group, and believe their copper exposure is undervalued by the market relative to lower quality, pure copper miners. The second largest positive contributor was a long position in Qube Holdings (ASX: QUB +16%), following a takeover bid from Macquarie Asset Management.
Other positive contributors for the quarter included short positions in consumer-exposed stocks such as Wesfarmers (ASX: WES -10%), and Eagers Automotive (ASX: APE -14%), which fell as interest rate cut expectations changed to potential hikes. A short position in Treasury Wine Estates (ASX: TWE -26%) also contributed positively, as the company − under a new CEO − finally acknowledged the multiple operational and strategic challenges that we have been monitoring for quite some time. Additionally, a long position in Orica (ASX: ORI +9%) performed well following a positive AGM update in December.
The main detractors to performance during the quarter were short positions in Pilbara Minerals (ASX: PLS +23%), and Liontown (ASX: LTR +67%), as lithium prices continued to rally. We were surprised by recent policy announcements from China that could further stimulate demand for lithium intensive applications, such as energy storage systems, despite the impact of the impending return of large lithium supplier CATL. We have since reduced much of our short exposure to lithium, preferring to take a more balanced stance until greater clarity emerges.
Within Defensives, negative contributors during the quarter included a long position in ResMed (ASX: RMD -12%), which continued to be weighed down by concerns around the potential expansion of GLP-1 drug usage despite solid operational performance, and a long position in Goodman Group (ASX: GMG -5%), which declined in line with global data centre related equities. Goodman Group subsequently bounced late in December after announcing its inaugural European data centre fund, at which point we took the opportunity to add to the position. We favour Goodman Group primarily for its capital partnership model, which co-funds the capital-intensive data centre rollout and offers higher returns on equity compared with self-funded developments. We expect further partnerships of this nature to be announced throughout 2026, which would likely support strong medium-term earnings growth.
Read More: Why Strong Earnings Didn’t Always Translate to Stock Gains in 2025
Globally, further rate cuts in the US will likely temper the strength of the US dollar and keep a strong interest in alternatives such as gold. A weaker US dollar should also provide a supportive backdrop for commodities. Copper is the preferred commodity exposure, given the accelerating demand from the energy transition and limited growth in mine supply, reflected in the portfolio’s long positions in Capstone Copper, and the large-diversified miners which is believed to offer the cheapest exposure in the sector.
We expect Australian household expenditure to remain reasonably buoyant, but maintain a cautious outlook on consumer discretionary stocks, whose valuations had become excessively optimistic and are still in the process of normalising, especially in an environment where interest rates in Australia are likely to remain on hold.
Domestic credit growth has been solid, boosted by investor housing lending and business credit. Despite this, the banking sector has struggled to achieve profit growth above inflation, as cost pressures and competitive intensity have remained high. With a shift in interest rate expectations and APRA tightening up lending standards, the expectation is that domestic credit growth will slow. The spate of super fund buying that pushed the sector to record valuations appears to have peaked and we expect the sector to continue to derate given the weak fundamentals. The global insurance cycle has peaked as a lack of disasters has seen reinsurance premiums start to fall, although there is still some pricing power in the domestic market amongst home and motor, and we retain a preference for the general insurers.
While 2026 is likely to bring its share of surprises, we remain positive on equity markets overall. Historically, the most significant macro downside risks to markets have stemmed from interest rate shocks or major growth disappointments. A significant interest rate shock seems unlikely given strong political pressure for lower interest rates in the US and a contained oil price. Recent political changes in Venezuela may also contribute to additional oil supply over time, further supporting a more benign inflation outlook.
On the growth front, 44% of real US GDP growth in 2025 was driven by AI-related spending. While the growth rate of this spending is expected to slow in 2026, broader corporate adoption of AI tools provide potential for good profit growth, particularly for companies who are not direct beneficiaries of the AI infrastructure build-out but benefit from increased operational efficiencies from AI adoption. The Australian market has more relative exposure to AI adopters than AI enablers. Although adoption remains early in Australia, we are actively looking to identify companies with the potential to translate AI implementation into sustainably higher returns on capital.
Our disciplined approach to portfolio construction, style-neutral framework and focus on bottom-up earnings analysis, positions the portfolio well to take advantage of valuation dislocations that have been built up in recent years, while retaining the flexibility to implement new opportunities as they arise.
Despite ongoing macro uncertainty driven by evolving US policy under the Trump administration and continued tensions with China, we expect 2026 to mark a return to a more fundamentally driven market, with stock performance increasingly reflecting company earnings rather than flow-driven valuation effects – an environment in which our process should be better positioned to perform.
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