The King William Street-based company posted a $271.7 million profit for the year ending 30 June – 13.2 per cent less than FY22’s performance – while income rose by 10.2 per cent in the 12 months.

The company attributes the profit decrease to one-off income of $61.7 million received in the prior financial year due to the merger of BHP’s oil and gas assets with Woodside Energy and Tabcorp’s demerger of the Lottery Corporation.

Excluding these one-off gains in FY22, Argo Investment’s profits would have lifted by 8.2 per cent in the latest reporting period.

The results follow a year of “persistent inflation, a sombre global economic outlook and the steepest interest rate increases in recent history” according to Argo which says the share market defied expectations to “perform strongly”.

Tech was a standout for Argo, while companies taking advantage of the rechargeable battery boom also performed well.

“Although a range of economic headwinds fuelled periods of volatility, particularly in the first quarter, investors tended to ‘look through’ these challenges,” Argo said.

“All industry sectors generated positive returns, although technology was the standout performer, surging by more than 30 per cent.

“Companies leveraged to lithium and other battery minerals also generated particularly strong returns.”

The group’s investment performance was up 11.4 per cent, an underperformance on the top 200 shares on the market which saw a 14.8 per cent lift in returns.

“The relative underperformance of the portfolio this year reflects investor sentiment pivoting back to growth-style investments, whereas Argo’s investment process favours more mature businesses that can maintain and grow their dividends,” Argo said.

In the 12 months, the total number of stocks in the investment portfolio decreased from 93 to 89 as Argo exited its holdings in the likes of Pact Group, Tabcorp Holdings and Tassal Group.

The company is upbeat on economic indicators pointing to a ‘soft landing’, with central banks appearing to be “successfully navigating the narrow path of lowering inflation without causing a recession”.

“Only a short time ago, the prospect of global recession seemed likely as central banks aggressively raised interest rates to control rampant inflation,” Argo said.

“Like many other developed economies, Australia has remained surprisingly robust despite high inflation and a raft of other, mainly macroeconomic, challenges.

“The economy’s resilience has been largely underpinned by fiscal stimulus and historically low unemployment.”

Argo remains concerned about the interest rate, which is “increasingly weighing on sentiment and negatively impacting spending”.

As such, the investment firm is keeping its eye on commentary from listed companies providing insight into consumer health and the effects of higher interest rates on business operations.

“So far, we are seeing evidence that as cost of living pressures grow, spending is moderating,” Argo said.

“While current investor sentiment indicates that Australia and the global economies should be able to avoid recession, in our view further share market volatility is likely and growth will be muted over the medium-to-longer-term.

“With no debt, cash available and a diversified portfolio of quality stocks, Argo is well-positioned to navigate these conditions applying our conservative, long-term investment approach to identify quality companies.”

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