CHART: Listed investment group Argo has made big changes to its $5 Billion portfolio

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Argo, the ASX-listed investment group, has made larger than normal shifts in its portfolio over the last year.

In the six months to December, $215 million was spent on long-term investment purchases, partly funded by $61 million in disposals.

Preferred sectors are health care, utilities and other financials. This is reflected in Argo’s biggest buys of the year: Medibank Private, APA Group, Santos, Commonwealth Bank of Australia, Asaleo Care and Telstra Corporation.

The biggest sell downs were Milton Corporation, the acceptance of the takeover offer for David Jones and the fully exited positions in News Corporation and Orora.

The cash balance is $89 million, or about 1.8% of total assets of $4.9 billion. The number of stocks held increased slightly to 104.

Managing director Jason Beddow says there were larger than normal shifts in the sector allocation of the portfolio in 2014.

“This is primarily due to the weakness of share prices in the energy and materials (especially mining) sectors relative to the rest of the market, which has reduced our portfolio weighting in those areas,”he says.

“In addition, we have deployed some of Argo’s cash balance into our preferred sectors during the year, increasing the portfolio weighting in health care, utilities and other financials in particular.”

The following chart shows the portfolio’s sector diversification the end of December with last year’s comparative figures in brackets:

Argo’s investment mix.

Beddow says 2015 is a volatile, and more difficult to navigate, investment environment.

There is a growing economic divergence between the US and many other developed countries.

The US economy is strengthening, leading to a stronger US dollar and potentially higher interest rates.

This is in stark contrast to the continued aggressive easing of monetary policy in both the EU and Japan.

In Australia, many of the themes that emerged in 2014 appear to have sufficient momentum to continue into 2015.

“We expect that business activity and investment will continue to rotate towards non-mining sectors, as mining related capital expenditure continues to fall,” he says.

Argo announced profit of $104.8 million for the first half, a rise of 2.9%.

The interim dividend is 14 cents, up 3.7%.

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