BLACKROCK NORTH AMERICAN INCOME TRUST PLC: Portfolio Update
BLACKROCK NORTH AMERICAN INCOME TRUST plc
All information is at 31 December 2013 and unaudited.
Performance at month end with net income reinvested
One Three Six Since Month months months launch (24 Oct 2012) Net asset value 1.3% 6.6% 2.5% 19.4% Share price -2.6% 3.0% -0.2% 16.3% Russell 1000 Value Index 1.4% 7.6% 4.7% 30.2% Source: BlackRock At month end Net asset value - capital only: 112.44p Net asset value - cum income: 113.19p Share price: 112.25p Discount to cum income NAV: 0.8% Net yield*: 3.6% Total assets including current year revenue: £112.9m Target yield**: 4.0% Gearing: nil Options overwrite: 17.9% Ordinary shares in issue: 99,761,305 During the month, the Company has issued 150,000 shares for proceeds of £0.2m. *based on dividends of 1p per share each declared on 14 February 2013, 14 May 2013, 6 August 2013 and 3 October 2013 ** based on issue price of 100p Benchmark Sector Analysis Total Assets (%) Financials 21.8 Industrials 14.6 Energy 13.7 Consumer Staples 11.3 Consumer Discretionary 9.6 Health Care 8.8 Materials 7.0 Utilities 5.6 Information Technology 5.3 Telecommunication Services 3.3 Net current liabilities -1.0 ----- 100.0 ===== Country Analysis Total Assets (%) USA 93.2 Canada 2.6 Australia 1.6 France 1.4 United Kingdom 1.3 Netherlands 0.9 Net current liabilities -1.0 ----- 100.0 ===== Ten Largest Investments(in alphabetical order) Company Country of Risk Chevron USA Comcast USA Exxon Mobil USA General Electric USA Home Depot USA JPMorgan Chase USA Merck USA Pfizer USA Prudential Financial USA Wells Fargo USA Bob Shearer and Kathleen Anderson, representing the Investment Manager, noted: Performance For the one month period ended 31 December 2013, the Company posted a 1.3% increase in its NAV while the share price declined by 2.6% (all in sterling). The Company's benchmark, the Russell 1000 Value Index, returned 1.4% for the period. On a relative basis, the largest contributor to the Company's performance during the period was a combination of stock selection and an underweight to the financials sector. Not owning benchmark holding Bank of America Corporation and owning non-benchmark holding American Express Company proved particularly beneficial. Other positive contributors during the month included an overweight to the materials sector and an underweight to the health care sector. An overweight to consumer discretionary and stock selection in consumer staples also modestly helped relative returns for the period. The largest detractor from relative performance for the month was a combination of stock selection and an underweight to the information technology sector. Owning Microsoft Corporation, a non-benchmark holding, proved particularly costly. Stock selection in the materials and industrials sectors also hurt relative returns for the period, as did an overweight to consumer staples and stock selection in the telecommunication services sector. Transactions/Options Transactions: There were no notable transactions to report for the month of December. As of 31 December 2013, the Company's options exposure was 17.9% and the delta of the options was 90.4%. Positioning The Company is currently overweight to the consumer staples, materials, industrials, consumer discretionary and telecommunication services sectors. We are underweight to the financials, health care, information technology, energy and utilities sectors. Current Outlook: 2013 was an exceptionally strong year for the US equity market, achieving its best return since 1997 and only the nineteenth time it has eclipsed 30% in a calendar year since 1926. US equities climbed steadily higher throughout the year led by the small, mid-cap and growth areas of the market place. Despite a few speed bumps along the way (elimination of the 2% payroll tax cut, budget sequestration, Fed exit strategy and political infighting, to name a few) the US economy continued to show signs of a modest yet sustainable recovery. Although deflation and politics remain primary concerns heading into the new year, we believe there are many tailwinds in place to support US equities. Corporations are exceptionally healthy, are carrying high cash balances and continue to return capital to investors in the form of growing dividends and buybacks. The S&P's aggregate income statement is likely to achieve meaningfully higher revenues and earnings than in previous years, and after having cumulatively bled nearly $400bn since 2008, equities seem primed to benefit from more investment dollars flooding into the market. On the macro side, housing has grown stronger, unemployment has improved and the Fed had enough confidence to take its first baby step in December by reducing its pace of bond-buying. Collectively, we believe these variables should provide more stability for stocks, and decelerating correlations should afford a higher degree of opportunity for active managers during 2014. Though high quality stocks underperformed their lower quality counterparts during 2013, we believe that these stocks are likely to be stronger performers in a slow growth, low inflation economy with gradually rising interest rates. From a valuation perspective, mega cap stocks remain more attractively valued than other areas of the market place, are carrying higher yields and will have a greater ability to fund projects from cash reserves should rates rise and financing costs accelerate. Within this space, we continue to focus on sectors likely to experience momentum in this environment. Financials now account for over 21% of the portfolio, and is a sector we view as a natural beneficiary in a recovering domestic economy; we increased weightings in diversified banks, regional banks and insurance companies during 2013. Materials and industrials, collectively, make up approximately 21% of the portfolio and we believe they will benefit from global population growth and the explosive proliferation of a middle class in emerging markets. Together, consumer staples and consumer discretionary also account for nearly 21% of the portfolio. Companies within these sectors are likely to profit from lower unemployment, eventual wage growth and a rebound in home prices over time. While technology and health care are relatively smaller parts of the portfolio, we believe they will be sectors of growing importance in the years to come as steadier cash flows will lead to more companies paying dividends. The Company remains well-positioned to capture growth and deliver consistent income to investors, but importantly, ready to provide relative protection should headwinds persist and market volatility intensify in the New Year. 22 January 2014 ENDS Latest information is available by typing www.blackrock.co.uk/brna on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal). Neither the contents of the Manager's website nor the contents of any website accessible from hyperlinks on the Manager's website (or any other website) is incorporated into, or forms part of, this announcement. -0- Jan/22/2014 14:15 GMT