Satrix style tracker Q1 2019

What drove performance in Q1 2019?

| 8 May 2019


The Momentum signal has seen a strong recovery since December 2018, along with general market sentiment which has started a trend after a year of gyrations and rotating market leadership. As such, Price Momentum is still lagging significantly over a 12-month period, but this underperformance can often be quickly recouped during a Momentum recovery.

Earnings Revisions (a sub-component of headline Momentum) displayed some interesting characteristics recently, as the factor showed more cyclicality than expected. Over the previous quarter, this factor rose more than Price Momentum, although this could be due to significant underperformance over Q4 2018. Traditionally, this factor fulfils a defensive role within a broad Momentum strategy.


After Value signals domestically delivered a strong 2018 performance overall, this factor once again delivered some positive outcomes during the first quarter of 2019. Surprisingly, there was broad consistency between the sub-Value factors, as Price to Book, Price to Earnings, Price to Cash and Dividend Yield all showed pleasantly positive return spreads.  This could be seen as abnormal because the spread across the Value family is usually quite different, but also shows cyclical recovery domestically, driven by cheaper Resource shares which rose almost 18% over the quarter.

Price to Book once again produced a fantastic return, while the more defensive Dividend Yield factor also returned a strong return spread.


In a reversal of fortunes, Quality saw some profit taking as the equity market turnaround showed a preference to cheaper cyclical shares. This was after an extended period of the risk-off environment which provided a fertile ground for Quality factors, in particular profitability factors such as Return on Equity.  Investors have been favouring stocks with high profits in order to mitigate macro challenges, but now that economic sentiment has improved at the margin, stocks that deliver sustainable profits tend to be neglected despite their durable competitive advantages.

Debt to Equity delivered a negative return over the quarter, as the factor’s defensive role continues to be tested during both periods of correction and recovery.

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Satrix Managers (RF) (Pty) Ltd (Satrix) a registered and approved Manager in Collective Investment Schemes in Securities and an authorised financial services provider in terms of the FAIS. Collective investment schemes are generally medium- to long-term investments. Unit Trusts and ETFs the investor essentially owns a “proportionate share” (in proportion to the participatory interest held in the fund) of the underlying investments held by the fund. With Unit Trusts, the investor holds participatory units issued by the fund while in the case of an ETF, the participatory interest, while issued by the fund, comprises a listed security traded on the stock exchange. ETFs are index tracking funds, registered as a Collective Investment and can be traded by any stockbroker on the stock exchange or via Investment Plans and online trading platforms. ETFs may incur additional costs due to it being listed on the JSE. Past performance is not necessarily a guide to future performance and the value of investments / units may go up or down. A schedule of fees and charges, and maximum commissions are available on the Minimum Disclosure Document or upon request from the Manager. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Should the respective portfolio engage in scrip lending, the utility percentage and related counterparties can be viewed on the ETF Minimum Disclosure Document. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The index, the applicable tracking error and the portfolio performance relative to the index can be viewed on the ETF Minimum Disclosure Document and/or on the Satrix website. Performance is based on NAV to NAV calculations of the portfolio. Individual performance may differ to that of the portfolio as a result of initial fees, actual investment date, dividend withholding tax and income reinvestment date. The reinvestment of income is calculated based on actual distributed amount and factors such as payment date and reinvestment date must be considered. If the fund holds assets in foreign countries it could be exposed to the following risks regarding potential constraints on liquidity and the repatriation of funds: macro-economic, political, foreign exchange, tax, settlement and potential limitations on the availability of market information.
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