This may not be the year the world comes to an end, as the now-famous Mayan prophecy suggests, but 2012 must nevertheless rank at least among the most interesting periods in the 21st century.

Of course the millennium is still relatively new, the sample size still small. But consider: The year dawned mid-rally for global equities, in the aftermath of the first downgrade of US credit in August 2011.

We’ve come full circle as 2012 draws to a close, with recently reelected President Barack Obama and returning Speaker of the House John Boehner negotiating to undo the very legislation agreed to 18 months ago to end the Great Debt-Limit Increase Debacle.

Within the arc described by these two points we’ve seen Europe nearly come apart, nearly come together as never before, nearly come apart again and now inch ever-closer to a true economic/financial/political union with a recent agreement on a common banking union.

Turmoil across the pond ended the late 2011, early 2012 rally amid concerns about contagions and worry of a reprise of the 2007-09 Great Financial Crisis (GFC).

We’ve also witnessed the beginnings–the very beginnings–of China’s transition from an investment-led to a consumption-led growth model.

It hasn’t been entirely clear–or smooth–and a slowdown from double-digit rates of growth that came to be normal during the first decade of the 21st century have made the 7.5 percent to 8 percent rates of recent vintage seem a snail’s pace.

Chinese leaders, through a program of stimulus not quite as aggressive as the one implemented in response to the GFC but nevertheless substantial, seem to have arrested the slowdown and to have positioned the domestic economy for stabilization and further expansion into 2013.

Meanwhile, the Communist Party of China is midway through a once-a-decade leadership transition.

Bringing it all back home, a presidential election even more contentious than the last one (and wait until the next one) along with congressional contests left the US in much the same position it was before Nov. 6, 2012, that over a barrel that seems inevitably headed down a fiscal cliff.

Never has a degree in political science been more germane a tool in the investing game than it is today.

Despite it all, global equities are staging an impressive late fourth-quarter rally, spurred some days by optimism about Europe, on others by signs of a China gathering new momentum, on still others because of positive news on Obama-Boehner negotiations.

Australia’s has been one of the most impressive run-ups. Since mid-November the Australian Securities Exchange/Standard & Poor’s 200 Index is up 7.72 percent in US dollar terms, as the Australian dollar has surged against the US dollar.

The aussie has bounced from USD1.0332 on Nov. 15 to USD1.0573 as of this writing.

By comparison, the S&P 500 Index is up 4.60 percent since Nov. 15, while the MSCI World Index is up 6.14 percent.

Australia’s performance is even more impressive if you step back further to consider the entire fourth quarter. The S&P/ASX 200 is up 6.90 percent in US dollar terms since Sept. 30, 2012, the MSCI 1.75 percent. The S&P is still in negative territory, with a total return of 0.93 percent.

Australian equities, as measured by the ASX/S&P 200, are in fact having their best year since the snap-back of 2009, when stocks Down Under rallied by 30.85 percent in price-only terms and posted a total return of 37.03 percent. A strong aussie rally made that a 66.70 percent capital appreciation and a 74.57 percent total return in US dollar terms.

In 2012 the ASX/S&P 200 is up 12.98 percent in local price-only terms, with a total return of 18.36 percent. A relatively modest rise in the aussie has pushed the US-dollar capital appreciation to 16.44 percent, the total return to 21.98 percent.

The 2012 performance comes despite what is an obviously slowing economy Down Under, one that’s struggling with the next phase of its own as well China’s growth miracle. Australia’s is less grandiose, in that it’s simply managed to avoid slipping into recession for two decades, while China is coming a track record of 10 percent-plus gross domestic product (GDP) growth.

But these countries are tightly linked. And they will be for years to come, as even with a consumption-based economy China will still need to accommodate a rapidly urbanizing population, including its increasing demand for modern housing and transportation and its maturing diet.

The trajectory of the Reserve Bank of Australia’s (RBA) Index of Commodity Prices (ICP) says a lot about what’s happened in China and Down Under during the past decade and this year.

According to the RBA, “The ICP provides a timely indicator of the prices received by Australian commodity exporters.”

It’s a Laspeyres index, which means that it’s a weighted average of recent changes in commodity prices.

The ICP weighs prices of 20 of Australia’s key commodity exports, which currently account for around 85 per cent of primary commodity export earnings.

These include (with index weightings as of September 2009 in parentheses) “rural commodities” such as beef and veal (4.1 percent), wheat (2.9 percent), wool (1.6 percent), milk powder (1.0 percent), sugar (1.5 percent), barley (0.6 percent), canola (0.5 percent) and cotton (0.4 percent); “base metals” such as aluminum (4.1 percent), copper (2.8 percent), lead (1.2 percent), zinc (1.0 percent) and nickel (0.6 percent); and “other resources” such as metallurgical coal (15.9 percent), iron ore (20.8 percent), thermal coal (9.8 percent), gold (15.1 percent), liquefied natural gas (5.1 percent), crude oil (7.3 percent) and alumina (3.8 percent).

The longer-term trend for this measure is clearly higher, but it did roll over in 2012. Over the past year, in fact, the index has fallen by 11.6 percent in Special Drawing Rights (SDR, an international reserve asset created by the IMF, the value of is based on a basket of four key international currencies, the US dollar, the euro, the Japanese yen and the British pound) terms.

Much of this fall has been due to declines in the prices of coking coal and iron ore.

However, the preliminary estimate for November indicates the ICP rose by 1.7 percent on a monthly average basis in SDR terms after falling by a revised 2.9 percent in October.

The largest contributors to the rise in November were increases in the prices of iron ore and coking coal. The prices of rural commodities also increased, while the prices of base metals declined.

It’s too early to declare the worst over. But recent data, including an upside employment surprise for November, suggest Australia is responding to China’s rebound.

Below we focus, on a sector-by-sector basis and in accordance with the organization of the AE How They Rate table, on performance for the coverage universe from Dec. 30, 2011, through Dec. 7, 2012, the most recent date for which complete data was available at the time of our research.

We’ve been in on some of our big winners, we’ve cut losses early where we made mistakes and our Portfolio picks are well positioned to grow and generate sustainable dividends for the long term.

For the relevant time frame the ASX/S&P 200 Index produced a total return in US dollar terms of 20.14 percent, the S&P 500 Index 15.19 percent, the MSCI World Index 14.78 percent. Our Conservative Holdings posted a total return of 34.14 percent, the Aggressive Holdings 6.29 percent.

Altogether the average total return for current Portfolio Holdings was 22.54 percent to the positive.

Comments in this month’s How They Rate include total return figures for each member of the coverage universe from Dec. 30, 2011, through the close of trade in Australia on Dec. 7, 2012. This is the capital gain or loss plus dividends in US dollar terms for the period described.

Basic Materials

The elegance of alphabetical order means we start with the worst news about 2012 sector performance first.

Barring a prodigious Santa Claus Rally, Basic Materials will be the only one of the 11 groups into which we’ve divided the How They Rate coverage universe to post a negative average total return this year.

These 29 companies–which includes those that explore for and produce iron ore, metallurgical and thermal coal, gold and silver, other base metals such as aluminum, copper, nickel and zinc as well as those that provide mining and crushing services–combined to generate an average loss in US dollar terms of 14.66 percent from Dec. 30, 2011, through the close of trade in Australia on Dec. 7, 2012.

The five members of the Basic Materials group we feature in the AE Portfolio Aggressive Holdings–BHP Billiton Ltd (ASX: BHP, NYSE: BHP), Mineral Resources Ltd (ASX: MIN, OTC: MALRF), Newcrest Mining Ltd (ASX: NCM, OTC: NCMGF, ADR: NCMGY), New Hope Corp Ltd (ASX: NHC, OTC: NHPEF) and Rio Tinto Ltd (ASX: RIO, NYSE: RIO)–have outperformed the broader complement, posting an average loss of 8.04 percent.

In recent issues’ In Focus features we’ve highlighted other members of this group, including unhedged gold producer Medusa Mining Ltd (ASX: MML, OTC: MDSMF) and production-leveraged services provider MACA Ltd (ASX: MLD, OTC: None).

A cash-rich and low-cost producer, Medusa has generated a total return of 40.85 percent in 2012. With a solid development pipeline and a realistic path to production growth at a time when gold investing is on the come, Medusa is a good choice for aggressive investors who’d like to get paid along with their Midas Metal investment.

MACA is leveraged to continuing production rather than the capital-expenditure-heavy exploration and development cycle of the mining process. The company continues to win orders for new work, building an impressive backlog that makes its future cash flow highly visible. The stock has returned 21.62 percent in 2012 and is trading below our buy-under target.

As is evident in the graph “Off the Peak,” commodity prices have come down from their 2011 highs. The Reserve Bank of Australia Index of Commodity Prices has declined from 136.2 as of December 2011 to 122.4 as of the most recent reading, for November 2012. And that’s actually up from a 2012 low of 120.3 in October.

It’s equally important to note that this index remains in a long-term uptrend and is markedly higher than the 2009 Great Financial Crisis trough.

There will be a normalization of commodity prices as the torrid pace of China’s growth during the first decade of the 21st century naturally eases. At the same time, however, urbanization in the Middle Kingdom and rapid development elsewhere in Asia means that prices for commodities will settle in a range well above that which prevailed in the 20th century.

In the Portfolio we emphasize Basic Materials companies with the ability to withstand short-term volatility and build wealth for the long term. These companies will, of course, benefit as previous efforts to stimulate the Chinese economy grab root and other policy measures are implemented by a newly installed group of leaders.

Consumer Goods

This small collection of companies encompasses a wide variety of activities.

The five members of the Consumer Goods group manufacture and retail specialized surf-wear; produce food products such as baked goods, spreads and dressings; handles grain and exports malt;  makes and markets consumer and industrial appliances and water management systems; and provides feed for livestock.

Consumer Goods, led by AE Portfolio Aggressive Holding GrainCorp Ltd (ASX: GNC, OTC: GRCLF), also rewarded investors handsomely in 2012, posting an average total return of 29.62 percent.

GrainCorp’s contribution is a 71.95 percent total return, a figure juiced by the recent play for the company made by US-based agribusiness giant Archer-Daniels-Midland Company (NYSE: ADM).

ADM raised its all-cash offer from AUD11.75 per share to AUD12.20 on Dec. 3. GrainCorp management rejected this new bid, too, on the basis that it undervalues the assets in question. ADM now owns 19.9 percent of GrainCorp, which will make it difficult for a competitor to outbid it for total control.

GrainCorp management, meanwhile, is looking for something north of AUD13 per share.

On Nov. 15 GrainCorp posted net profit after tax (NPAT) for fiscal 2012 (ended Sept. 30, 2012) of AUD205 million, up 19 percent from AUD172 million in fiscal 2011. EBITDA grew by 18 percent to AUD414 million.

Managing Director Alison Watkins forecast a profit increase of AUD45 million, or 21.9 percent, for fiscal 2013. Ms. Watkins had previously estimated fiscal 2013 profit would rise by AUD40 million. According to management GrainCorp’s strategic growth initiatives are on track to deliver incremental underlying EBITDA of approximately AUD110 million over the next four years.

GrainCorp’s board approved and management announced dividends totaling AUD0.35 per share, including a AUD0.20 per share final dividend and a AUD0.15 per share special dividend. Total dividends for fiscal 2012 of AUD0.65 per share exceed fiscal 2011’s total of AUD0.55 by 18.2 percent.

The final and special dividends will be paid Dec. 17, 2012, to shareholders of record as of Dec. 3.

In response to the raised ADM offer GrainCorp management stated, “The GrainCorp board will review the revised proposal and will advise the market in due course. GrainCorp has a unique portfolio of integrated, strategic assets and is confident in its outlook and strategy to continue to deliver shareholder value.” We agree.

ADM’s pursuit is acknowledgement that GrainCorp occupies key ground as the population of emerging Asia grows and its eating habits change. This is a long-term story that will also benefit livestock feed producer Ridley Corp (ASX: RIC, OTC: RIDYF).

Ridley recently agreed to sell its Cheetham Salt business for AUD150 million, which proceeds will allow it to bolster its already strong market position and grow along with a maturing Asian food chain. Ridley, yielding north of 6 percent as of this writing, is a buy under USD1.30.

Food products outfit Goodman Fielder Ltd (ASX: GFF, OTC: GDFLF, ADR: GDFLY) has posted an impressive 56.26 percent total return but hasn’t declared a dividend in more than a year. The big share-price performance in 2012 is about a bounce from a low base, as speculators bet on a rebound that seems a ways off for a stock that’s stuck in long-term down-trend that started before the Great Financial Crisis.

Management, which noted a “challenging” operating environment for the first half of fiscal 2013, will revisit its dividend policy in February.

Appliance maker GUD Holdings Ltd (ASX: GUD, OTC: GUDHF, ADR: GUDDY) is experiencing “soft” trading conditions thus far in fiscal 2013, and management has forecast a first-half earnings decline of as much as 15 percent.

But management has maintained the distribution and even paid a special dividend after selling a significant asset in mid-2012. GUD has never cut its payout and now yields 7.8 percent. It’s a buy on dips to USD8.50 on the ASX or on the US over-the-counter (OTC) market using the symbol GUDHF.

GUD also trades as an American Depositary Receipt (ADR) on the US OTC market under the symbol GUDDY. The ADR, which is worth two ordinary, ASX-listed shares, is a buy under USD17.

Consumer Services

This group of companies, bigger in number and as varied in operation as the Consumer Goods collection, has lagged the S&P/ASX 200 as well as the S&P 500 and the MSCI World Index in 2012, posting an average total return of 13.24 percent.

Movie theater and upscale hotel operator Amalgamated Holdings Ltd (ASX: AHD, OTC: None) has been a bright spot, generating a total return of 30.10 percent. Amalgamated, long on of our favorite companies, joined the AE Portfolio Aggressive Holdings in the November issue. Read more about it in this Sector Spotlight.

Amalgamated will benefit from a strong pipeline of new movie releases in late 2012 and into 2013. Although it is exposed to the consumer, movie attendance has proven to be less elastic than other similarly exposed industries such as retailing.

We did, however, add one of Australia’s biggest retailers, Wesfarmers Ltd (ASX: WES, OTC: WFAFF, ADR: WFAFY) to the Conservative Holdings last month on the durability of its revenue streams.

Its grocery store operations, underpinned by liquor sales, are complemented by a coal production unit that offers only upside from these levels. Read more about Wesfarmers in this November Sector Spotlight.

We’ve also been high on gaming companies Tabcorp Holdings Ltd (ASX: TAH, OTC: TABCF) and Tatts Group Ltd (ASX: TTS, OTC: TTSLF). Australian consumers generally have been pinched over the last year-plus but they’ve continued to scratch their gambling itch.

Early trends for fiscal 2013 continue to be encouraging for both companies. Tabcorp is yielding more than 8 percent at current levels, Tatts Group north of 7 percent.

Media companies have been a mixed bag in 2012. APN News & Media Holdings Ltd (ASX: APN, OTC: APNDF) has suffered the most amid a continuing advertising drought, while Consolidated Media Holdings Ltd posted Consumer Services’ best total return on the strength of a premium buyout by News Corp (ASX: NWS, NSDQ: NWSA).

Our preferred media exposure is through diversified conglomerate Seven Group Holdings Ltd (ASX: SVW, OTC: None), the largest shareholder in Seven West Media Ltd (ASX: SWM, OTC: WANHF). Seven West operates iconic media brands the Seven Network and The West Australian.

Seven Group’s WesTrac unit is the Caterpillar dealer for Western Australia, New South Wales, the Australian Capital Territory and northern China. Caterpillar is the leading global construction and mining equipment provider. WesTrac is one of Caterpillar’s top five dealers in terms of sales volume among 182 dealers around the world.

We recommended Seven Group in last month’s In Focus feature as a buy under USD7. The stock closed at USD6.50 the day the November issue was published but has surged to USD8.35 since, contributing to a 17.57 total return for 2012.

Financials

The 13 companies classified as Financials in the How They Rate coverage universe, including the Big Four Australian banks and a solid selection of Australian real estate investment trusts, or A-REITs, posted an average total return of 29.19 percent from Dec. 30, 2011, through Dec. 7, 2012.

The two representatives in the AE Portfolio Conservative Holdings, Australand Property Group (ASX: ALZ, OTC: AUAOF) and Australia & New Zealand Banking Group Ltd (ASX: ANZ, OTC: ANEWF, ADR: ANZBY) outperformed this average and the three major benchmark indexes, posting total returns of 34.06 percent and 31.75 percent, respectively.

Australand has rejected a AUD2.8 billion offer for its industrial and commercial properties by GPT Group (ASX: GPT, OTC: GPTGF), noting that the bid doesn’t include a sufficient premium for p. Australand units traded up on the news.

Management of the A-REIT has guided to 3 percent to 4 percent earnings growth for 2012. Australand will report results for the year in early February. The units are currently trading well north of our USD2.80 buy-under target, pushed higher on the GPT offer. Wait for a pullback or a dividend increase before paying more than that.

ANZ posted a statutory net profit after tax (NPAT) of AUD5.7 billion and underlying profit of AUD6.0 billion for the fiscal year ended Sept. 30, 2012. Both figures were up 6 percent over fiscal 2011.

ANZ’s now five-year quest to become a “super-regional” bank continued to progress, as 21 percent of overall revenue was derived outside its still-core Australia and New Zealand geographic focus.

Though Australia and New Zealand combined retail and commercial operations drove half of overall earnings growth, Global Markets revenue increased 14 percent to AUD1.9 billion, as customer sales grew 10 percent to account for 61 percent of total income, and Greater China is now ANZ’s third-largest market in terms of earnings.

ANZ expects China to post 7 percent to 8 percent growth in 2013. “China and India are the growth engines of Asia,” said Mr. Smith, “and Asia still remains the best performing region in the world economy.”

Management confirmed a final dividend of AUD0.79 per share, up 3.94 percent year over year, to be paid Dec. 19, 2012, to shareholders of record as of Nov. 14, 2012. That brings the full-year dividend to AUD1.45 per share, up 3.57 percent from AUD1.40 for fiscal 2011.

Australia & New Zealand Banking Group remains a buy on dips to USD24 on the ASX using the symbol ANZ or on the US over-the-counter (OTC) market using the symbol ANEWF.

ANZ also trades as an American Depositary Receipt (ADR) on the US OTC market. ANZ’s ADR, which trades under the symbol ANZBY, represents one ASX-listed share (and all the rights and benefits attendant thereto) and is also a buy under USD24.

Health Care

The small collection of Australia-and-New Zealand-focused Health Care companies we follow in How They rate posted the second-highest average total return at 40.14 percent, as each of the six generated gains that beat the S&P/ASX 200, the S&P 500 and the MSCI World Index.

AE Portfolio Conservative Holding CSL Ltd (ASX: CSL, OTC: CMXHF, ADR: CMXHY), which continues to push higher, led the way with a 78.79 percent total return. Prospects for further operational success for this specialty biopharmaceutical company will be bolstered by a 15 percent increase in fiscal 2013 research and development spending above fiscal 2012 levels.

Management has already affirmed profit growth for the current fiscal year of 12 percent. CSL’s pipeline is characterized by a consistent timeline of launch dates, solid variation in the indications its products are created to treat and geographic diversity.

The stock has run well past our USD35 buy-under target and is effectively a hold at these levels.

A more recent addition to the Portfolio, Ramsay Health Care Ltd (ASX: RHC, OTC: RMSYF), last month affirmed core net profit after tax (NPAT) and core earnings per share (EPS) growth guidance of 10 percent to 12 percent for fiscal 2013.

Management noted that industry fundamentals remain strong and that it had approved AUD20.6 million in new brownfield development during the first quarter of the fiscal year.

Ramsay has posted a solid rally over the past month, taking it out to a 43.95 percent total return for 2012 and beyond our buy-under target of USD26. Management will report results for the six months ending Dec. 31, 2012, on or about Feb. 25, 2013, at which time an increase in its interim dividend is likely to be announced.

Ramsay boosted its fiscal 2012 interim dividend by 13.3 percent. We’ll revisit our buy-under target when we have solid information.

Industrials

The Industrials group, which comprises 17 companies engaged in construction activity, the manufacture and marketing of materials used in mining and construction, consultants on mining and building projects and where environmental impact studies are required as well as transportation-related businesses, has posted an average total return of 7.10 percent in 2012.

That’s the second-worst showing among the 11 How They Rate sector groups, although the two representatives in the AE Portfolio, Cardno Ltd (ASX: CDD, OTC: COLDF) and Transurban Group (ASX: TCL, OTC: TRAUF), have each outperformed, posting gains of 26.89 percent and 17.83 percent, respectively.

Cardno and Transurban are both discussed in separate Sector Spotlights this month. Click here to read more about Cardno. Click here to read more about Transurban.

Oil & Gas

APA Group (ASX: APA, OTC: APAJF), the largest natural gas infrastructure owner/operator in Australia, posted a total return of 32.89 percent from Dec. 30, 2011, through Dec. 7, 2012. As of this writing the stock had last traded at AUD5.73, or USD6.03, an all-time high. The stock has rallied well past our current buy-under target of USD5.50 per share.

That’s the second-best performance among a group that posted an average total return of 11.92 percent.

Petroleum refiner Caltex Australia Ltd (ASX: CTX, OTC: CTXAF, ADR: CTXAY) led the way at 62.82 percent. We rated the stock a buy in How They Rate coverage from September 2011 through February 2012, reducing it to a hold in the March issue. We raised it to a buy again, under USD16, in the October issue.

But we’ve been behind the curve on this one all the way. Caltex’ refiner margin metric has been improving since December 2011, and management forecast a return to profitability in 2012.

Net profit for the 12 months ending Dec. 31 will likely be between AUD145 million and AUD165 million on a replacement-cost-of-sales basis, a smoothed measure that excludes the value of its stockpiles. In 2011 Caltex lost AUD852 million on the writedown of the value of the Kurnell facility in Sydney and the Lytton refinery in Brisbane.

Caltex this year decided to shut its Kurnell refinery by 2014 and convert it into a fuel import terminal, as it struggles to compete with larger facilities in Asia that can produce oil products more cheaply. This–in addition to a patchy recent dividend history–is the long-term trend that prevented us from adding it to the Portfolio early in 2012.

Moving on from regret, in mid-November APA filed notices of compulsory acquisition related to its pursuit of pipeline owner Hastings Diversified Utilities Fund (ASX: HDF). The acquisition is expected to close shortly.

In order to get Australian Competition and Consumer Commission approval APA is required to sell the Moomba-to-Adelaide Pipeline System, which could fetch AUD500 million. The assets APA is picking up–the South West Queensland Pipeline and the Pilbara Energy Pipeline–will enhance its network and reinforce its market-leading position in Australia.

Once the transaction closes, APA will own or operate a unique footprint of 14,000 km of gas pipelines.

Management noted during its annual general meeting in October that “the business is performing in line with our expectations and guidance” in the first quarter of fiscal 2013.

Chairman Len Bleasel also noted that “as a consequence of our offer for HDF being declared unconditional” guidance for fiscal 2013 earnings before interest, taxation, depreciation and amortization (EBITDA) “is altered.”

Specifically, APA now expects fiscal 2013 EBITDA in the range of AUD660 million to AUD670 million, up from a prior forecast of AUD540 million to AUD550 million. APA posted fiscal 2012 EBITDA of AUD526 million, which was up 6.9 percent from fiscal 2011.

Assuming it meets the midpoint of its new target range fiscal 2013 EBITDA growth will be 26.4 percent.

Management also noted that this revised guidance doesn’t take into consideration any earnings that will come from HDF once HDF’s operating results are consolidated into APA’s books. It merely reflects the increase in APA’s ownership stake from 20.7 percent as of the time its original offer for HDF was made.

Management reiterated its previous guidance for fiscal 2013 distributions of “at least 35 cents per security,” which is in line with what it paid for fiscal 2012.

On Dec. 12 management announced an estimated interim distribution ofAUD0.17 per share for the six months ending Dec. 31, 2012. The actual amount of the interim distribution will be determined following finalization of half-year results, which are due for release on Feb. 20, 2013.

The interim distribution will be paid Mar. 13, 2013, to shareholders of record as of Dec. 31, 2012. APA shares traded ex-dividend as of Dec. 21.

APA has posted a 15.5 percent rally on the ASX and the US over-the-counter (OTC) listing under the symbol APAJF has surged 16.3 percent since the company’s Oct. 25 annual general meeting in Sydney.

Management’s forecast has undoubtedly lit a fire under buyers. However, our buy-under target is firm until management puts an actual increase behind the “at least 35 cents” dividend forecast language for fiscal 2013.

APA Group remains a buy under USD5.50 on the ASX or the US OTC market.

Oil Search (ASX: OSH, OTC: OISHF, ADR: OISHY) stock slumped in mid-November after project operator Exxon Mobil Corp (NYSE: XOM) reported that costs for the Papua New Guinea Liquefied Natural Gas (PNG LNG) project would be 21 percent higher at USD19 billion that previously forecast.

Part of this cost, however, involves a 5 percent capacity increase to 6.9 million metric tons of LNG per year. A higher Australian dollar has also had an impact, as have torrential rains that have prompted Exxon to bring in special equipment to deal with what have become consistent downpours.

The project is still on track to deliver first gas in 2014. Oil Search also continues to report extremely encouraging results for its exploration program and is in position to seriously contemplate an additional train for PNG LNG, output from which is already contracted under long-term off-take arrangements.

Oil Search posted a total return of 17.38 percent from Dec. 30, 2011, through Dec. 7, 2012, and is poised for long-term growth.

Aggressive Holding WorleyParsons Ltd (ASX: WOR, OTC: WYGPF, ADR: WYGPY) is down for the period in question, with a negative total return of 5.12 percent. The stock actually plumbed a new 2012 low this week despite signing a series of new contracts for energy engineering work literally all over the world.

Management’s guidance for fiscal 2013 is that growth will be weighted to the second half of the year, with the first half flat. This stock may be suffering because of concern about the impact of slowing economic growth on new exploration and development projects in the energy space.

The long-term view is that WorleyParsons remains the engineer of choice for the world’s leading E&P companies, and it continues to win business. It remains a buy under USD30.

Technology

This is the third-best-performing group in How They Rate from Dec. 30, 2011, through Dec. 7, 2012, and it includes the No. 1 individual company in total return terms in the entire coverage universe, radio communications and metal detector manufacturer Codan Ltd (ASX: CDA, OTC: None).

Codan’s innovative software enabled radios haven’t had the uptake its Minelab unit’s metal detectors have experienced. But the share price certainly reflects management’s aggressive guidance upgrade for fiscal 2013 based on strong first-quarter results.

Financial software maker Iress Ltd (ASX: IRE, OTC: None) is a market-beater this year, even though its core markets have experienced a good deal of uncertainty. The company is making solid progress adapting to the emerging mobile world, recently releasing an app that allows its financial services clients to access data via tablets and other portable computing devices.

Iress appears to be well positioned heading into calendar 2013, as demand for financial data continues to rise.

Both Codan and Iress are solid companies that have zoomed past value range; at the same time, they’re only available to investors who are able to trade directly on the Australian Securities Exchange.

Through mid-October automated traffic surveillance service provider Redflex Holdings Ltd (ASX: RDF, OTC: RFLXF, ADR: RFLXY) was on course for a 30 percent-plus total return year.

But then the company announced that the City of Chicago, a major consumer of its traffic-control and photo-driven ticket systems, is investigating potentially improper relationships between Codan personnel and certain municipal employees, including the provision of a hotel room for one of the latter by one of the former.

Management has noted that Chicago accounted for 13 percent of fiscal 2012 revenue. Its current contract with the city expires on Jan. 31, 2013, with Chicago holding an option to extend the arrangement for two years. There is no timeline for resolution of the investigation, though Redflex has and will incur significant legal fees as it unfolds.

Chicago has declared Redflex a “non-responsible bidder” for the purposes of an Automated Speed Enforcement Program tender process in which the company has been participating. Redflex’s proposal has therefore been rejected. This tender process relates to products and services that are separate from Redflex’s existing contracts with the city.

We have Redflex rated a buy under USD2.15, but it’s best for conservative investors to avoid the stock as the Chicago situation plays out. Speculators may be able to pick up a solid snap-back candidate.

As detailed in the Oct. 24 edition of Down Under Digest, Conservative Holding SMS Management & Technology Ltd (ASX: SMX, OTC: SMSUF) suffered a steep selloff in the aftermath of underwhelming fiscal 2013 guidance issued at the company’s annual general meeting.

Nevertheless, the company posted a total return of 12.79 percent from Dec. 30, 2011, through Dec. 7.

Based on financial performance to date and contracts signed in the first quarter, SMS management estimates that fiscal 2012 first-half NPAT will be in the range of AUD12.5 million to AUD14 million. NPAT for the first half of 2011 was AUD15.2 million.

SMS signed AUD392 million of new contracts during fiscal 2012, up 12 percent from the previous year. But this growth slowed in the fourth quarter, and this slowing trend has persisted in the first quarter of fiscal 2013. New contracts signed in the current fiscal year total AUD81 million as of Oct. 23, below the prior corresponding period.

Management reiterated its policy to pay dividends amounting to 65 percent to 70 percent of NPAT.

During its presentation of fiscal 2012 results to analysts and investors management noted that earnings before interest, taxation, depreciation and amortization (EBITDA) and earnings per share have grown every year over the past seven but one, during fiscal 2009, the height of the Great Financial Crisis.

And even during that period SMS maintained its dividend, a sign of its consistency and dependability.

Based on this track record and its recent dividend growth we plan to stick with SMS, which remains a buy under USD6.50.

Telecommunications

Telecommunications companies have posted the highest average total return among AE How They Rate coverage groups through Dec. 7, 46.68 percent.

In fact the “loser” in the group, Singapore Telecomunications Ltd (Singapore: ST, ASX: SGT, OTC: SNGNF, ADR: SGAPY), is up more than 16 percent this year, nearly equaling the performance of the S&P/ASX 200 Index and besting both the S&P 500 Index and the MSCI World Index.

Telecoms in general are among the most reliable cash-generating businesses in the world. Australia’s are no different.

In an age of rising demand for connectivity anytime, anywhere and at faster and faster speeds companies such as Telstra Corp Ltd (ASX: TLS, OTC: TTRAF, ADR: TLSYY) and M2 Telecommunications Group Ltd (ASX: MTU, OTC: MTCZF) continue to invest in network capacity and expanded services.

Telstra, Australia’s dominant telecom, continues to leverage its position, investing in its network and expanding its offering of cloud-based services. Management has made a conscious decision to forego dividend growth in favor of extending the key competitive advantage its wireless network conveys and strengthening its balance sheet.

Management has said, however, that beginning in fiscal 2014 it will once again review its payout policy every six months. Telstra has generated a total return of 44.75 percent, trailing M2 at 57.69 and sector leader Amcom Telecommunications Ltd (ASX: AMM, OTC: ATMUF) at 86.51 percent.

Telstra, an original member of the AE Portfolio, is and has been trading well above our USD3.50 buy-under target (USD17.50 for the ADR traded on the US OTC market under the symbol TLSYY; it’s worth five ordinary shares) since June.

But this is no time to chase it. We await more definitive word on a dividend increase before we’ll pay any more for the stock, which has enjoyed a bit of a safety premium amid a volatile market. Telstra will report fiscal 2013 first-half results on Feb. 7, 2013.

M2 is also trading above buy target, which we raised from USD3 to USD3.45 in September after the company boosted its fiscal 2012 dividend by 14.6 percent. During this fourth-quarter rally the shares have sprung from below AUD3.60 on the ASX to as high as AUD4.14 this week, which represents an all-time high for M2.

It’s no time to chase M2, either. The company will post results for the six months ended Dec. 31, 2012, on or about Feb. 27, 2013.

Amcom is a niche fiber-network operator that’s aggressively moving to expand the telecommunications and IT services it offers businesses, governments and clients through the cloud. Amcom’s footprint is expanding rapidly.

Management has forecast solid growth for fiscal 2013, as first-quarter data network sales are running 20 percent ahead of the year-ago pace. An interim dividend increase is likely when it announces first-half results on or about Feb. 20, 2013. We’ll revisit our buy-under target at that time.

Utilities

We hold the biggest winner–Envestra Ltd (ASX: ENV, OTC: EVSRF), with a total return of 40.99 percent–and the biggest loser–Origin Energy Ltd (ASX: ORG, OTC: OGFGF, ADR: OGFGY), with a negative return of 11.23 percent–from the Utilities group in the AE Portfolio.

The six stocks that comprise this section of How They Rate posted an average total return of 20.54 percent from Dec. 30, 2011, through Dec. 7, 2012, basically in line with the S&P/ASX 200 and ahead of the S&P 500 and the MSCI World Index due in large part to appreciation in the Australian dollar versus the US dollar.

AGL Energy Ltd (ASX: AGK, OTC: AGLNF, ADR: AGLNY) slumped in recent weeks following a regulatory decision that through a wrench into fiscal 2013 guidance. The company remains well on track for the long term, however, with a collection of assets that will serve it and investors well as Australia’s tax on carbon takes full effect.

Origin Energy management has most recently guided for flat to 5 percent growth in fiscal 2013 earnings, before interest, taxation, depreciation and amortization (EBITDA). This is a downward revision from a prior forecast of 5 percent to 10 percent growth. In the short term the company is saddled with regulatory burdens similar to AGL’s.

In the long term, however, Origin’s energy markets business gives it a solid foundation for predictable cash flow. And its stake in the Australia Pacific LNG project will deliver a strong boost to earnings and cash flow when it’s completed; AP LNG is on track to deliver first gas in 2015.

Management has forecast long-term earnings per share growth of 10 percent to 15 percent, which should underpin solid dividend growth as well. Origin Energy is a buy under USD15.

DUET Group (ASX: DUE, OTC: DUETF), which is yielding 7.5 percent, had solid year operationally and also accomplished the significant feat of internalizing its management. This act will save cash over the long term.

Management is now considering a simplification of its organizational structure, which should free up even more cash and provide further support for long-term distribution growth.

The company has seen good support in debt markets for its refinancing efforts in recent months. Management also reaffirmed prior fiscal 2013 distribution guidance of AUD0.165 per share, 3.1 percent above fiscal 2012, and declared an interim dividend of AUD0.0825.

We’re boosting our buy-under target for DUET from USD2 to USD2.20.

Funds

Our preference is buy individual stocks over fund, be they the ever-shrinking mutual variety, the venerable closed-end type or the on-the-come exchange-traded (ETF) iteration.

The fact that the 23 individual stocks that currently comprise the AE Portfolio generated an average total return in US dollar terms of 22.93 percent from Dec. 30, 2011, through Dec. 7, 2012, beating the S&P/ASX 200 Index, the S&P 500 and the MSCI World Index, is at least some validation of our approach.

However, Aberdeen Asia–Pacific Income Fund (NYSE: FAX) represent a compelling and truly unique opportunity. It’s one of only five out of a universe of 106 US closed-end funds with a “Gold” rating from investment research firm Morningstar. The fund was so cited because it’s the only one of its kind that enables US-based investors to access developing Asia’s debt markets as well as Australia’s.

Asia Pacific Income produced a 13.45 percent return for our marking period. But it does pay a reliable, sustainable USD0.035 per share per month. That’s an annual dividend rate of USD0.42, which at current levels works out to a yield of better than 5 percent.

CurrencyShares Australian Dollar Trust (NYSE: FXA) is a proxy for the aussie. From Dec. 30, 2011, through Dec. 7, 2012, the ETF generated a total return of 5.49 percent; capital appreciation was 2.26 percent versus a 2.73 percent gain for the aussie against the US dollar, but the ETF pays a monthly distribution based on interest earned on deposited Australian dollars.

IQ Australia Small Cap ETF (NYSE: KROO) lagged the broader Australian market with a total return of 4.96 percent during the period in question.

iShares MSCI Australia Index Fund (NYSE: EWA), meanwhile, approximated the return of our 23 individual Portfolio Holdings with a total return of 21.04 percent. This ETF includes Australia’s Big Four banks as well as usual large-cap suspects such as BHP Billiton, Rio Tinto and Wesfarmers.