Satrix style tracker Q4 2019

What Drove Performance in Q4 2019

| 5 February 2020

Momentum

Momentum continues to be the best performing factor in 2019 by a clear margin. Price Momentum is now leading any other factor by more than 15% over the 12-month period, targeting very specific share exposures in the broader sectors.

Earnings revision followed suit and managed to end the year on a high. While Earnings Revision sometimes behaves differently to pure Price momentum, the fourth quarter showed a positive correlation in a strong market.

Value

After Value signals domestically delivered an overall strong 2018 performance, the factor was fairly neutral in 2019. The more defensive Dividend Yield strategy underperformed in the fourth quarter of 2019 as investors rotated out of (high) yield strategies into growth and momentum stocks.

Price to Book was fairly neutral over the quarter, but still posted a positive 12-month performance. Once again, a sector effect cannot be ignored as the positive market sentiment largely focussed on Financial and Industrials counters (less value exposure) rather than Resources (more value exposure).

Quality

Quality, previously the darling factor of 2018, had a complete turn of fortunes in 2019. Return on Equity (RoE) was by far the worst performing factor as local dynamics prompted investors to switch out of (high) RoE local stocks into Rand-hedged resource counters.

Debt to Equity also delivered a negative return over the quarter and is now firmly under the water over a 12-month period.

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