Performance summary

The CC Sage Capital Absolute Return Fund returned 1.59% in November versus the RBA Cash Rate return of 0.28%.*

The CC Sage Capital Equity Plus Fund returned -2.00% in November, versus the S&P/ASX 200 benchmark return of -2.66%.*

Contributors and detractors to performance

The Sage Groups^ that contributed the most to performance for the month were Global Cyclicals and Domestic Cyclicals, while Resources and Defensives were detractors. The positive contributors were based on a long position in Qube Holdings (ASX: QUB +11%), which received a takeover offer from Macquarie Asset Management at a 27.8% premium subject to a period of due diligence, along with a short position in James Hardie Industries (ASX: JHX -6%), which fell sharply at the beginning of the month post weak peer results and its unexpected removal from MSCI indices following a reclassification as a US stock. Based on this, Sage Capital took the opportunity to close the position. The company has since upgraded its full year guidance, citing strong siding and trim sales and a seemingly more optimistic view on the macroeconomic outlook.

Other positive contributors were a short position in Eagers Automotive (ASX: APE -16%) and a long position in Orica (ASX: ORI +9%). Eagers Automotive gave back most of its gains from the previous month, partly driven by the RBA's decision to hold interest rates and lower expectations of near-term cuts given the company’s exposure to interest rates. Orica delivered a strong result and upgraded its medium term guidance for its digital solutions and specialty mining chemicals businesses as it continues to benefit from resilient mine production activity.

Detractors from performance were based on short positions in Pilbara Minerals (ASX: PLS +23%), and Liontown Resources (ASX: LTR +15%), which continue to move higher on the back of the rally in the lithium price, primarily driven by temporary Chinese supply cuts and accelerating demand for energy storage systems which use lithium. In the Defensives Sage Group, the key detractor was a long position in Goodman Group (ASX: GMG -10%), which fell due to both its exposure to interest rates and the technology trade through its data centres.

Portfolio Positioning and Outlook

Equity markets remain near record highs globally, although the Australian market has started to soften. This is largely due to structural differences with the AI and semiconductor exposure of the US remaining strong, while key parts of the Australian market have begun to soften. The Australian banking sector is well off its peak as gravity has begun to exert itself on crazy valuations, while growth stocks have also remained under steady pressure. Softness in these areas has weighed on the Australian market, despite some stronger performance across the resources sector.

The broad neutral style approach of the portfolio has meant Sage Capital has avoided exposure to these big swings, although some normalisation of extreme value divergences, even within Sage Groups, is beginning to benefit performance.

A recent string of hot inflation data has seen interest rate expectations shift in Australia, from further cuts to the potential for a rise next year. This has seen a reversal of momentum across many consumer discretionary and building exposed stocks. Even without further interest rate cuts, the consumer is at a reasonably good place and continues to spend. As such, Sage Capital sees earnings as being generally robust across the markets. Resources have been strong lately, supported by robust metal prices including copper, aluminium and lithium, while iron ore has held steady. This has been driven by supply disruptions particularly at the Grasberg copper mine which has impacted copper production, alongside stronger demand with ongoing electrification trends. The bulk miners are seeking better value at this stage, as they have not rallied as hard as the pure-play miners.

​​​Read the fund reports for additional commentary.

• CC Sage Capital Absolute Return Fund monthly report
• CC Sage Capital Equity Plus Fund monthly report

* Past performance is not indicative of future performance. ^ Sage Capital uses a custom grouping system for long short positions (Defensives, Domestic Cyclicals, Global Cyclicals, Gold, Growth, REITs, Resources and Yield). With a focus on the principal macro earnings drivers for each stock, Sage Groups allow for comparisons to GICS for selecting stocks within a sector.