September, 2023
• In September, the Fund outperformed its benchmark, the MSCI All Country World Index, which was down 3.80% in Australian dollar terms.
Contributors
• UK-based oil giant Shell contributed to results. Oil demand continues to recover, and Shell boasts solid fundamentals with a strong project pipeline and an attractive dividend yield. The Portfolio’s Investment Management Team (the Team) finds Shell attractively valued, offering mid-teens free-cash-flow yield with realistic targets of growing free cash flow/share 10%/year toward 2030.
• China-based fast-food restaurant company Yum China contributed. The company increased its new stores targets, and its investments in digitalization have decreased the number of staff needed at new stores. The Team maintains Yum China supported by a superior growth potential.
• Samsung Electronics contributed on news that the electronics firm would begin supplying memory chips to NVIDIA, a leader in artificial intelligence. The Team believes Samsung Electronics is wellpositioned in semiconductors (particularly memory) with shares offering compelling upside.
Dectractors
• Commercial real estate firm CBRE detracted as higher borrowing costs and the possibility of further rate hikes weighed on the commercial property market. The Team finds CBRE best positioned within the commercial real estate service segment and likes the current valuation.
August, 2023
• In August, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 1.14% in Australian dollar terms.
Dectractors
• PayPal detracted, as the digital payment platform’s 2Q:23 margins declined from the first quarter on higher expenses related to bad loans, though its revenue and earnings beat analysts’ expectations. The Portfolio’s Investment Management Team (the Team) maintains PayPal on attractive valuation grounds following significant derating. Longer term, the Team expects PayPal to grow in line with e-commerce, which is not reflected in the current valuation.
• Investment bank Goldman Sachs detracted, lagging peers, as the company has divested from its struggling consumer banking business. The Team finds Goldman Sachs trading at a compelling valuation considering continuously leading market positioning as well as achievable profitability targets’ return on tangible equity of 15%–17%.
• QUALCOMM detracted on concerns around a lackluster rebound in demand for smartphones, particularly given deteriorating macro signals from China. The Team believes that QUALCOMM is attractively priced, now trading at a major discount versus semiconductor peers.
Contributors
• Cloud services and cybersecurity company Akamai Technologies contributed in August. The company provided fiscal third-quarter revenue and profit guidance above analyst expectations, driven in part by strong demand for cybersecurity services. The Team finds Akamai well positioned as the leading player within the content delivery network, while benefiting from compelling growth within its security segment.
• Cognizant contributed after the technology firm announced plans to invest $1 billion to expand its generative artificial intelligence capabilities over the next three years. The Team exited Cognizant following this outperformance on weakening fundamentals.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/GE-Monthly-Fact-Sheet.pdfJuly, 2023
• In July, the Fund outperformed its benchmark, the MSCI All Country World Index, which was up 2.40% in Australian dollar terms.
Contributors
• Alibaba Group rallied as the Chinese government announced a fine for Ant Group, which was viewed as the end of the regulatory crackdown on Alibaba. The government has recently become more supportive of private businesses, especially internet platform companies. In addition, Alibaba is expected to report accelerating gross merchandise value growth and continued margin expansion for the second quarter. The Portfolio’s Investment Management Team (the Team) finds Alibaba attractively valued.
• US-based investment bank Goldman Sachs contributed. While writedowns on its consumer businesses hurt earnings, shares climbed on management’s positive outlook for investment banking. The Team maintains Goldman Sachs on a combination of continued market leadership, attractive valuation and an expectation of the bank being able to deliver on its 15%–17% return on tangible equity target.
• Oilfield services company SLB contributed. The stock rose on expectations that the Fed would slow rate hikes, easing recessionary worries that have dampened the outlook for oil demand. The Team views SLB as well-positioned for growth following a period of underinvestment within the oil industry
Dectractors
• British foodservice company Compass Group detracted. The company has made progress on margins by increasing prices and mitigating higher costs, but it cautioned that such progress could slow if inflation persists. The Team believes Compass Group still has some margin catch-up ahead of it, and continues to like the leading market position.
• South Korea-based electronics manufacturer Samsung Electronics detracted from results. Inflation-dampened consumer demand and excess memory-chip inventories have hurt the company’s semiconductor sales, leading to production cuts. The Team maintains Samsung Electronics due to attractive valuation with leadership position across several businesses.
• US-based payments company American Express detracted as investors weighed a potential uptick in customer defaults against the company’s record profits. Earnings for 2Q:23 topped analysts’ expectations, but revenue disappointed and credit losses edged up. The Team finds American Express attractively valued.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Monthly-Fact-Sheet-11.pdfJune, 2023
• In June, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 2.87% in Australian dollar terms.
Detractors
• Health insurance provider Elevance Health detracted amid a broad sell-off of health insurers after competitor UnitedHealth Group warned that pent-up demand for surgeries would lead to increased costs for insurance companies. The Portfolio’s Investment Management Team (the Team) maintains Elevance on compelling valuation and expectations of continued 12%-15% earnings-pershare growth.
• US-based investment bank Goldman Sachs detracted during the month. The company announced additional job cuts and cautioned that the economic environment would lead to a slowdown in dealmaking and trading revenue. The Team’s investment case in Goldman Sachs is supported by valuation and trading around book value per share, while guiding toward 15%-17% return on tangible equity in the medium term.
• Swiss pharmaceutical giant Roche detracted. Following greater competition and declining sales for its cancer medicines, the company announced it will seek to sell its biologic drug plant in California, where some of its cancer medications are made. The Team maintains Roche due to its valuation and strong franchise.
Contributors
• Otis Worldwide, which manufactures, installs, and services elevators and escalators, contributed during the month. Investors believe that Otis is positioned to benefit from recent federal legislation that will increase infrastructure spending. The Team finds Otis attractively valued with the market not appreciating the stability of its service business.
• Parker Hannifin, which specializes in motion-control technologies, contributed as the company benefited from supply chain automation, lifting its e-commerce sales. The Team’s investment case in Parker Hannifin has played out; hence, shares were reduced during the month.
• Oilfield services company SLB contributed after Saudi Arabia announced plans to cut oil production in July in a bid to increase oil prices amid waning global demand. The Team believes that SLB is attractively valued with the market underappreciating its potential superior EBITDA growth over the coming years.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Monthly-Fact-Sheet-9.pdfMay, 2023
In May, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 1.02% in Australian dollar terms.
Detractors
• PayPal detracted as the e-commerce company’s 2023 outlook disappointed investors. Its first-quarter earnings, revenue and payment volume all rose on a year-over-year basis, but the company’s revised earnings guidance raised concerns about pressure on margins. The Fund’s Investment Management Team (the Team) believes PayPal is attractively priced considering its above-average growth prospects, combined with cost saving opportunity and prudent capital management.
• Coffeehouse chain Starbucks detracted following concerns that the growth from China’s economic reopening was moderating, offsetting positive signals in its North American segment, which saw yearover-year quarterly revenue and margin growth. The Team maintains Starbucks primarily for its superior growth.
• Coca-Cola detracted as the soft drink manufacturer’s revenue growth recently slowed, although 1Q:23 revenues beat analyst expectations. Persistent inflation has also hampered results as production costs continue to rise. The Team finds Coca-Cola attractively priced on a cash-flow perspective.
Contributors
• Alphabet Inc., parent company of technology giant Google, contributed in May. At its developer’s conference, Google announced new artificial intelligence (AI) product features, boosting its credibility in the AI race and sending shares higher. The Team believes that Alphabet remains attractively priced with superior longer-term growth prospects.
• Software giant Microsoft contributed. While growth has slowed in its cloud business, the company has positioned itself to benefit from the rise in artificial intelligence with investments in ChatGPT and related product launches. The Team finds Microsoft attractively valued, with secular growth drivers being currently underappreciated, and likes its healthy balance sheet and discount compared with other software players.
• Akamai Technologies, a cloud services and content delivery network operator, contributed. Shares rose following the company’s strong 1Q:23 earnings. Both revenue and earnings topped analyst expectations. The Team maintains Akamai Technologies due to compelling valuation with a positive driver from continued mix shift toward security offering.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Monthly-Fact-Sheet-8.pdfApril, 2023
• In April, the Fund outperformed its benchmark, the MSCI All Country World Index, which was up 2.80% in Australian dollar terms.
Contributors
• Medical technology company Medtronic contributed. Shares rose on positive quarterly reports from industry peers, suggesting a favorable environment for medical device producers. The Portfolio’s Investment Management Team (the Team) believes that Medtronic has been on the right track since Geoff Martha took over as CEO, and likes its positioning within the med tech space.
• Asahi Group, the Japan-based food and beverage company, contributed. The company recently announced plans to increase prices, a move that should help offset rising production costs and aid margins. A rebound in tourism in Japan has also provided a tailwind for the stock. The Team’s investment case in Asahi Group is based on valuation, as its shares are trading at a massive discount versus those of international beverage peers. Most of Asahi’s sales are overseas, and the Team expects continued synergies from its integration with Carlton & United Breweries.
Detractors
• China-based e-commerce giant Alibaba Group detracted from performance. The stock has been volatile since the company announced plans to split into six different businesses earlier this year, and shares fell amid mixed economic data suggesting an uneven recovery from China’s zero-COVID policies. The Team maintains Alibaba Group primarily on valuation grounds, paying very low multiples for a net-cash leading player in the domestic e-commerce and cloud spaces, areas that are exposed to double-digit secular growth.
• Semiconductor company QUALCOMM detracted, as weak demand for handsets has pressured sales for chipmakers, leading to higher inventory levels and lower prices. The Team finds QUALCOMM attractively valued following its recent de-rating, trading at significant discount compared with the semiconductor index
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Monthly-Fact-Sheet-1-1.pdfMarch, 2023
In March, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 3.79% in Australian dollar terms.
Detractors
• Commercial real estate firm CBRE detracted. Shares fell amid a broad sell-off in real estate stocks as the Fed dashed hopes that the turmoil in banking would lead to a pause in rate hikes. The Portfolio’s Investment Management Team (the Team) finds CBRE strongly positioned within the commercial real estate services space with leading positions across property sales, leasing and facility management among others. CBRE’s balance sheet is strong and valuation undemanding, in the Team’s opinion.
• Wells Fargo detracted as US banks suffered from a broad sell-off following the collapse of Silicon Valley Bank as investors feared further contagion in the financial system. The Team reduced its position in Wells Fargo as better risk/reward was observed elsewhere within financials, i.e., within exchanges.
Contributors
• Software giant Microsoft contributed during the month. The company has shown early leadership in artificial intelligence (AI) services, such as its recent development in cybersecurity AI. The Team finds Microsoft attractively valued with secular growth drivers being underappreciated, as well as a healthy balance sheet and a discount compared with other software players.
• France-based multinational pharmaceutical and healthcare company Sanofi contributed. Its asthma drug Dupixent, jointly developed with Regeneron, showed promising results for treating chronic obstructive pulmonary disease, sending shares higher. The Team’s investment rationale in Sanofi is supported by attractive valuation, which doesn’t fully cover the expected growth from Dupixent over the coming years.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Monthly-Fact-Sheet-6.pdfFebruary, 2023
In February, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 1.50% in Australian dollar terms.
Detractors
• Alibaba Group, which is largely used as a proxy for Chinese equities, detracted amid profit-taking—driven by speculation over rising geopolitical tensions. The Portfolio’s Investment Management Team (the Team) finds Alibaba attractively valued, still trading at low-teens earnings with a healthy net cash balance sheet. Further support for the investment case is its market-leading position with double-digit revenue growth and expected margin expansion.
• Akamai Technologies, a cloud services and content delivery network operator, detracted. Shares fell after the company reported 4Q:22 financial results. Although earnings exceeded expectations, competitive concerns regarding its cloud computing segment led to an analyst downgrade. The Team maintains Akamai Technologies for its superior lead in content delivery networks, while growing handsomely in its security business. Valuation doesn’t screen compelling compared with IT peers.
• Video game company EA detracted, with sales of recent new releases underperforming expectations. The Team invests in EA, supported by its valuation (market multiple for better revenue and earnings CAGR), as well as its high moat sporting franchise (including FIFA), with a high level of recurring revenue.
Contributors
• Japan-based food and beverage company Asahi Group contributed as healthy quarterly numbers led to a much-improved leverage profile. Improved pricing and continued market-share gains were further supportive. The Team finds Asahi Group attractively valued, trading at a compelling discount versus international peers.
• UK-based oil giant Shell contributed during February. Shares climbed after the company reported better-than-expected earnings, as favourable natural gas trading offset lower oil and gas prices. The Team’s investment case in Shell is supported by superior cash-flow generation with a prudent stance toward capital deployment.
• Parker Hannifin, which specializes in motion control technologies, contributed. The company reported strong second-quarter results for its fiscal year 2023, with revenue and earnings beating expectations, sending shares higher. The Team holds Parker Hannifin for its attractive valuation, though risk/reward is less attractive following recent strength in share price.
January, 2023
In January, the Fund outperformed its benchmark, the MSCI All Country World Index, which was up 3.14% in Australian dollar terms.
Contributors
• Alibaba Group contributed during the month as it is considered one of the most direct plays and proxies on China’s reopening, which should drive demand growth. The company has also benefited from a shift in the Chinese government’s policy tone, which is now more supportive of the technology sector. The Portfolio’s Investment Management Team (the Team) finds Alibaba attractively valued despite the recent rerating. Further support for the investment case is its market leading position and a net cash balance sheet with double-digit revenue growth and margin expansion.
• Technology firm Cognizant contributed during the month. The company has seen significant growth in its digital business operations and recently announced a 10-year services agreement with CoreLogic, worth approximately US$1 billion. The Team’s investment case in Cognizant is primarily supported by valuation, with Cognizant trading at a compelling discount versus peers like Accenture.
Detractors
• Health insurance provider Elevance Health detracted. Shares declined sharply in the beginning of the month, though it pared some losses as the company reported solid 4Q:22 earnings supported by strong premiums. The Team finds Elevance Health attractively valued for its superior growth profile, most recently validated by its 2023 earningsper-share growth guidance.
• Beverage and snack company Coca-Cola detracted. The stock, seen as recession-resistant, outperformed a difficult market in 2022, but gave back some gains in January as its valuation outpaced the industry. The Team’s investment case in Coca-Cola is supported by its dominance within the soft drinks market with superior brand and longterm growth potential from emerging markets.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/197258448.pdfDecember, 2022
In December, the Fund outperformed its benchmark, the MSCI All Country World Index, which was down –5.13% in Australian dollar terms.
Contributors
Shares of Mitsubishi UFJ Financial Group (MUFG), a leading Japanbased financial services company, surged along with other Japanese bank stocks following the Bank of Japan’s unexpected announcement that it would broaden its yield-curve control tolerance range. The market interpreted this move as a potential precursor to tighter monetary policy, which could bring an end to Japan’s ultra-loose monetary policy and benefit its financials sector. The Portfolio’s Investment Management Team (the Team) finds MUFG attractively priced and particularly compelling considering the company’s more than 20% stake in Morgan Stanley.
Detractors
Investment banking company Goldman Sachs detracted. According to reports, the firm is planning significant layoffs amid a broad slowdown in merger and acquisition activity following a year of subdued investment banking movement. The Team finds Goldman Sachs offering re-rating potential attractive, as current valuation seems too cheap compared with profitability metrics.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/195694512.pdfNovember, 2022
In November, the Fund outperformed its benchmark, the MSCI All Country World Index, which was up 2.89% in Australian dollar terms.
Contributors
Alibaba Group contributed during the month, as the China-based technology company benefited from signals that the Chinese government may ease its strict COVID-19 policies. The Portfolio’s Investment Management Team (the Team) finds Alibaba Group attractively positioned in the secular growing Chinese e-commerce industry, trading at compelling valuation post its recent derating. • Galaxy Entertainment, a Macau-based gaming company, contributed.
The stock advanced as the Macau government renewed the gaming licenses for the city’s gaming operators, including Galaxy, for another ten years. The Team believes Galaxy Entertainment is attractively priced on normalized earnings, while still offering the best growth optionality in Macau, with new capacity in place.
Detractors
Medical technology company Medtronic detracted during the month. The company reported disappointing sales and lowered its earnings outlook for the full year as it works toward new US Food and Drug Administration approvals in its diabetes and robotics businesses. The Team views Medtronic as strongly positioned with compelling valuation, both relative and absolute.
Swiss pharmaceutical giant Roche detracted on disappointing news that the company’s Alzheimer’s disease candidate gantenerumab failed in its Phase III clinical trial. The Team’s investment case in Roche is supported by strong positioning within cancer, while still trading at attractive valuation.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/194710340.pdfOctober, 2022
In October, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 6.62% in Australian dollar terms.
Detractors
Hong Kong–based hotel and casino operator Galaxy Entertainment detracted after new COVID-19 lockdowns were announced. Prior to the outbreak, travel prospects to Macau had improved after China’s immigration bureau announced the reinstatement of its online visa system staring November 1, which increased the likelihood of a sooner-than-expected recovery for Macau’s gaming industry. The Portfolio’s Investment Management Team (the Team) finds Galaxy Entertainment attractively priced on normalized earnings, while still offering the best growth optionality in Macau with new capacity in place.
Japan-based food and beverage company Asahi Group detracted. The company posted solid year-over-year monthly revenue growth in its core businesses, but higher production costs have put pressure on margins. The Team maintains Asahi Group due to high and stable free cash flows.
Technology company Alibaba Group detracted, as Chinese stocks fell on concerns about the country’s economic outlook and a rise in COVID-19 cases. The Team finds Alibaba Group attractively positioned in the secular growing Chinese e-commerce industry, trading at compelling valuation post its recent derating.
Contributors
Health insurance provider Elevance Health contributed to relative returns. The company reported better-than-expected 3Q:22 earnings, reflecting strong membership growth. The Team finds Elevance Health attractively valued and believes the market underappreciated Elevance Health’s secular growth.
Investment banking company Goldman Sachs contributed after it reported quarterly earnings and revenue that beat analysts’ expectations. While merger activity was down from last year, the firm’s global markets revenue increased. The Team’s investment case in Goldman Sachs is supported by superior market positioning and compelling valuation.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/192941634.pdfSeptember, 2022
In September, the Fund underperformed its benchmark, the MSCI All Country World Index, which was down –3.58% in Australian dollar terms.
Detractors
• Asset manager BlackRock detracted amid broad weakness in the equity and fixed-income markets. The recent sell-offs have reduced the company’s assets under management and its management fees. The Portfolio’s Investment Management Team (the Team) holds BlackRock as it’s the largest player in an industry where scale matters. BlackRock maintains its leadership in flow, and trades at a compelling valuation at updated levels.
• Comcast detracted, as the provider of high-speed internet, media and communications struggled to revive the growth momentum that the COVID-19-related lockdowns provided. Competitive dynamics have also pressured cable companies as the industry sees increased competition from wireless carriers. The Team finds Comcast attractively valued, with robust free-cash-flow yields.
Contributors
• Hong Kong–based hotel and casino operator Galaxy Entertainment contributed. Shares rallied on news that Macau’s government would ease COVID-19 restrictions, increasing the likelihood of a sooner-than-expected recovery for Macau’s gaming industry. The Team finds Galaxy Entertainment attractively priced on normalized earnings while still offering the best growth optionality with new capacity in place.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/192122955-1.pdfAugust, 2022
In August, the Fund underperformed its benchmark, the MSCI All Country World Index, which was down 1.96% in Australian dollar terms.
Detractors
France-based multinational pharmaceutical and healthcare company Sanofi detracted. Shares fell after the company halted development of a potential breast cancer treatment following disappointing clinical trial results. Litigation concerns involving Zantac, a now-recalled heartburn drug that the company helped market, also weighed on investor sentiment. The Portfolio’s Investment Management Team (the Team) finds Sanofi attractively valued with market concerns for Zantac overhang excessive.
US-based elevator company Otis Worldwide detracted despite reporting solid 2Q:22 earnings and order growth, as it faced rising costs and exchange-rate headwinds. The Team maintains Otis for its strong position within the elevator market, especially within services.
Shares of Philips, the Netherlands-based electronics and healthcare technology company, fell on news that the FDA had provided a proposed consent decree in connection with the company’s massive recall of CPAP devices and ventilator machines. The impact of the June 2021 recall, as well as supplychain headwinds, led to a decline in sales. The Team’s investment case in Philips is supported by valuation; its stock is currently trading at a significant discount compared with its medtech peers.
Contributors
PayPal, the US-based digital payments company, contributed in August. PayPal reported second-quarter earnings and revenue that beat expectations, largely due to growth of its Venmo payment app. The company also announced a new share buyback program. The Team finds PayPal attractively valued, with support from superior growth, market share gain, cost-cutting potential, a healthy balance sheet and prudent capital deployment.
Shares of US-based biopharmaceutical company Alnylam Pharmaceuticals rose on positive top-line clinical trial results for Onpattro. The RNAi-based drug, already FDA approved as a polyneuropathy treatment, showed benefits in treating a rare heart condition. The Team’s investment case in Alnylam has played out, and Alnylam was exited during the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/190937611.pdfJuly, 2022
In July, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 5.43% in Australian dollar terms.
Detractors:
• Alibaba Group, one of the largest stocks in China, detracted in July. Investors were disappointed that the amount of fiscal stimulus provided by the Chinese government was not larger, and that the number of COVID-19 cases in China appears to be rising once again. Alibaba was also hurt by concerns that its shares could be delisted in the US. The Portfolio Investment Management Team’s (the Team) investment case in Alibaba is supported by attractive valuation trading at low-teens earnings for its compelling growth across e-commerce and cloud.
• Comcast detracted as the telecommunications company reported a lack of growth in broadband subscribers in the second quarter. The Team finds Comcast attractively valued with robust freecash-flow yields.
• Health insurance provider Elevance Health detracted. The company, previously known as Anthem and rebranded in June, reported second-quarter earnings that beat expectations, but shares fell on concerns about higher baseline medical costs. The Team believes Elevance Health offers an attractive combination of valuation and growth.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/190071071.pdfJune, 2022
In June, the Fund outperformed its benchmark, the MSCI All Country World Index, which was down -4.47% in Australian dollar terms.
Contributors:
• Netherlands-based internet investor Prosus contributed in June. The company is the largest shareholder in Tencent, the Chinabased technology giant, a position that Prosus said it would use to fund a new share buyback and help close the gap between its value and Tencent’s. The announcement drove the Prosus share price higher for the month, although it remains down for the year to date. The Portfolio’s Investment Management Team (the Team) finds Prosus attractively valued given the abnormally large discount to net asset value. Recent actions from Prosus management illustrate that they are actively working to narrow the holding discount.
• Alibaba Group rose along with the broad China internet sector as regulatory pressures on internet platform companies eased. The Team’s investment case in Alibaba Group is supported by the attractively combination of secular growth at compelling valuation.
Detractors:
• US-based Applied Materials, which supplies manufacturing and software services to the semiconductor industry, declined. In addition to continued supply challenges and rising interest rates, chip stocks faced recent pressure over the uncertain fate of pending US legislation designed to bolster domestic production. The Team finds Applied Materials attractively positioned as the world’s largest supplier of semiconductor equipment, and value supportive with strong secular growth drivers from expanding semiconductor capex.
• PayPal, the US-based digital payments company, detracted. Although investors reacted positively to its introduction of a new buy-now-pay-later feature, PayPal’s share price closed sharply lower for the month as rising interest rates weighed on growth stocks and as skyrocketing inflation dragged on consumer spending. The Team’s investment case in PayPal is supported by superior double-digit secular growth at attractive prices
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/189202489.pdfMay, 2022
In May, the Fund outperformed its benchmark, the MSCI All Country World Index, which was down -0.82% in Australian dollar terms
Contributors:
• US-based video-game maker EA contributed in May. The stock dropped mid-month after the company revealed it had lost its licensing deal with soccer’s governing body FIFA and that its 4Q:22 earnings and revenue had missed estimates. However, shares rebounded on subsequent news that EA was seeking a merger or acquisition. The Portfolio’s Investment Management Team (the Team) finds EA attractively valued with its secular growth being underappreciated by the market.
• Comcast, the US-based provider of high-speed internet, media and communications, rose. Despite a weak earnings report at the end of April, investors sought the relative safety of the dividendpaying stock amid rising interest rates and overall volatility, driving the Comcast share price substantially higher in May. The Team believes Comcast has defensive qualities that are attractive in the current uncertain economic times.
Detractors:
• Japan-based Asahi Group detracted in May. The food and beverage company’s 1Q:22 profit and earnings were down compared with 1Q:21 due to higher material costs, as well as lockdowns imposed in Australia and Japan in response to the coronavirus omicron variant. The Team finds Asahi Group attractively valued with strong FCF generation.
• US-based cybersecurity company Akamai Technologies detracted after its 1Q:22 revenue and earnings fell short of estimates. The company attributed this result to the current geopolitical climate and a stronger US dollar but noted that its security and computing services businesses—its main revenue generators—grew significantly in the first quarter. The Team’s investment case in Akamai is based on valuation, as well as superior growth within its security segment.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/188153417.pdfApril, 2022
In April, the Fund underperformed its benchmark, the MSCI All Country World Index, which was down -2.79% in Australian dollar terms.
DETRACTORS
+ US-based digital payments company PayPal detracted in April due to an array of sector- and stock-specific headwinds. While rising interest rates hit technology names, PayPal also grappled with reduced consumer spending in the face of higher inflation and continued supply-chainrelated shortages. In addition, fading pandemic restrictions prompted a return to in-person shopping and the use of more traditional payment methods. Investors worried about the imminent departure of PayPal’s CFO—and the lack of an obvious successor—as the company lowered its 2022 guidance. The Portfolio’s Investment Management Team (the Team) finds PayPal attractively valued considering the expected revenue growth of high-teens compound annual growth rate over the next five years.
+ BlackRock declined after the US-based asset manager released its 1Q:22 results. Despite a quarterly increase in its assets under management, the firm reported lower revenue for the period and revealed a decline in net inflows for the quarter and 12-month period ended March 31. The Team’s investment case in BlackRock is based on valuation while supported by a strong market position, including its leading ETF franchise.
+ Alphabet detracted from relative performance in April. The company faced headwinds related to the war in Ukraine, and Apple’s privacy changes negatively impacted YouTube. The Team believes Alphabet can sustain its superior growth rate and remains attractively valued.
CONTRIBUTORS
+ Shares in Japan-based food and beverage maker Asahi Group rose on reports that the company would pass higher expenses onto consumers through measures including its first price increase on canned beer in 14 years. The stock surged on this news and recouped losses sustained in March. The Team finds Asahi Group attractively valued with superior freecash-flow yields.
+ France-based pharmaceutical company Sanofi contributed as its 1Q:22 earnings beat estimates, driven by sales of Dupixent, its drug for eczema, asthma and other allergic conditions. Renewed demand for travel vaccines amid a recovery in global tourism also contributed to results. Although Sanofi announced that some studies surrounding respiratory diseases and multiple sclerosis would be delayed as the war in Ukraine forced the suspension of clinical trials in Russia and Belarus, the company said the schedule for regulatory approval requests would not be affected. The Team’s investment case in Sanofi is supported by valuation as it trades at an unjustified large discount versus peers.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/187297825.pdfMarch, 2022
The AB Global Equities Fund (the Fund) aims to achieve returns in excess of the MSCI All Country World Index in Australian dollars after fees over the medium to long term
In March, the Fund underperformed its benchmark, the MSCI All Country World Index, which was down -1.28% in Australian dollar terms.
DETRACTORS
+ Netherlands-based internet investor Prosus declined. The company is a large shareholder in Tencent, the China-based internet business whose stock price dropped sharply following reports it may have to pay a substantial fine for alleged money laundering. The stock also declined as Chinese markets overall fell on concerns over the country’s ties to Russia amid the ongoing conflict with Ukraine. In addition, Prosus is exposed to Russia through several operations in the country and announced it would write off its stake in VK Group, which owns a leading Russian social network.
CONTRIBUTORS
+ US-based health benefits company Anthem contributed in March. Health insurer stocks were boosted by a nationwide decline in severe COVID-19 cases, and as investors sought the relative safety of the industry amid the turmoil from the war in Ukraine affecting wider markets. Anthem also announced its plan to rebrand as Elevance Health to reflect its increased focus on holistic care. The Team finds Anthem attractively valued considering the expected growth.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/186285828.pdfFebruary, 2022
In February, the Fund underperformed its benchmark, the MSCI All Country World Index, which was down -4.41% in Australian dollar terms.
DETRACTORS:
Meta Platforms, the US-based social networking and marketing company, detracted in February. The Facebook parent’s stock dropped sharply after the company reported lower-than-expected 4Q:21 earnings and weaker guidance for 1Q:22. Meta attributed these results to privacy changes within the Apple operating system and the impact of inflation on its advertisers’ budgets. The fourth quarter also marked the first quarter in Facebook history that its number of daily active users had declined. The Portfolio’s Investment Management Team (the Team) finds Meta Platforms attractively valued and still expects the company’s revenue to grow double-digit for the coming years.
CONTRIBUTORS:
US-based health benefits company Anthem contributed in February. Amid a turbulent month, its share price rose after an analyst upgraded the stock and investors reacted to the company’s late-January release of its fourth-quarter and full-year 2021 results, which showed substantial top- and bottom-line growth. However, Anthem’s share price gave back some earlier gains later in February as markets responded to geopolitical events and as e-commerce giant Amazon announced it would provide telemedicine services, pressuring stocks of healthcare payers. The Team finds Anthem attractively valued considering the expected growth.
January, 2022
In January, the Fund outperformed its benchmark, the MSCI All Country World Index, which was down –1.88% in Australian dollar terms.
CONTRIBUTORS:
US-based Activision Blizzard contributed after Microsoft announced that it would buy the video-game holding company, which is known for its popular titles, including Candy Crush and Call of Duty. Activision’s share price had struggled since July 2021, after employees staged a walkout and a labor lawsuit alleged violations of equal pay and fair employment laws. The company’s share price rose dramatically in mid-January, following news of the Microsoft acquisition. The Portfolio’s Investment Management Team (the Team) exited Activision Blizzard during the month.
Shell, formerly Royal Dutch Shell, achieved its deleveraging targets while continuing to deliver very strong cash flows buoyed by surging oil prices. At the end of January, Shell completed the consolidation of its two share classes and relocated its head office to London in order to more easily fulfill its commitment to return cash to shareholders via buybacks and higher dividends. Shell’s aggressive decarbonization targets and focus on helping its customers transition from fossil fuels to low-carbon alternatives was well received, as was the sale of its Permian Basin assets to ConocoPhillips, which furthered its goal to become a net-zero energy business by 2050. The Team believes that Shell trades at a compelling valuation versus its US peers, with superior free cash flow.
US-based VMware contributed during the month. The company develops and markets virtualization and cloud infrastructure solutions for software defined data centers and hybrid cloud computing and was spun off from US-based computer company Dell Technologies in late 2021. VMware’s share price rose in January after an analyst upgraded the stock and because of a general bid for more value-oriented tech names. The Team finds VMware attractively priced for a leading position in virtualization as well as under appreciated growth from its security segment.
DETRACTORS:
Applied Materials, a US-based company that supplies manufacturing and software services to the semiconductor industry, detracted. Along with other chip stocks, its share price declined throughout the month amid rising interest rates and signs that the prolonged high demand and pandemic-induced semiconductor shortage may be easing. The Team’s investment case for Applied Materials is based on a leading position in semi equipment. While the industry is highly cyclical, long-term growth potential remains very healthy
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/183814827-1.pdfNovember, 2021
In November, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 3.38% in Australian dollar terms
DETRACTORS:
+ Netherlands-based healthcare device maker Philips detracted amid continued fallout from a product recall. Shares declined after a plant investigation suggested Philips may need to pay punitive damages related to several brands of its breathing machines. The share price had been climbing back from its steep June drop when the company revealed the devices may contain potentially hazardous materials. The Portfolio’s Investment Management Team (the Team) investment case in Philips is primarily rooted in valuation, and finds the sell-off exaggerated versus fundamental impact.
+ Asahi Group, a Japan-based manufacturer of alcoholic beverages, soft drinks and food products, declined for the month, reflecting broad weakness across Asian markets. Investor fears that rising inflation may cause a spike in prices for producers weighed on the stock. The Team believes Asahi Group remains attractively priced with strong free cash flow.
+ US-based health benefits company Anthem detracted following the late-November discovery of the new coronavirus omicron variant. In October, Anthem had raised its 2021 guidance and predicted the ongoing pandemic would have a smaller financial impact on the company in 2022. Its stock price is still up for the year to date. The Team maintains Anthem on the combination of valuation of earnings growth.
CONTRIBUTORS:
+ Applied Materials, a US-based company that supplies manufacturing and software services to the semiconductor industry, contributed. The stock continued its year-to-date climb as the ongoing pandemic-fueled microchip shortage accelerated demand for Applied Materials’ products. The Team maintains Applied Materials on the back of high fundamental returns with an expected massive profit pool. Industry consolidation and dispersion of end markets should result in lower through-thecycle cyclicality, and valuation remains compelling
October, 2021
The AB Global Equities Fund (the Fund) aims to achieve returns in excess of the MSCI All Country World Index in Australian dollars after fees over the medium to long term.
The Team added to its position in Coca-Cola following a longer period of underperformance. The Team believes that Coca-Cola benefits from strong free cash flow and payout yield, a prudent balance sheet, and a best-in-class brand, which supports its investment case.
+ The Team also added to its position in Comcast following weakness in the broader telecommunications sector. In the Team’s opinion, Comcast has a relatively cheap valuation and decent growth across its cable business.
+ Following weakness in share price as the result of domestic regulatory concerns, the Team increased its position in Iberdrola. The Team believes that Iberdrola’s current valuation is attractive and is supportive of its investment case.
+ Singapore Exchange was sold after it reached the Team’s price target.
+ The Team also exited SECOM after its investment case played out and its price target was reached.
+ Alphabet was trimmed on very strong year-to-date performance
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/180906514.pdfSeptember, 2021
In September, the Fund underperformed its benchmark, the MSCI All Country World Index, which was down -3.00% in Australian dollar terms
DETRACTORS
+ Otis Worldwide, a US-based company that develops, manufactures and markets elevators, escalators, moving walkways and related equipment detracted along with other construction-related companies with significant exposure to China’s property market. Fallout from increased regulations and the Evergrande situation could affect Otis, as China’s construction industry is a major end user of its products. Previously, the company reported strong second-quarter earnings and revenue estimates driven by recovery in its end markets. Despite the impact of a slowdown in China, the Portfolio’s Investment Management Team (the Team) continues to view Otis as a leader in a consolidated market, with structural growth opportunities from emerging markets and urbanization.
+ Galaxy Entertainment, a leading casino resort operator headquartered in the gaming hub of Macau, detracted as the spread of the coronavirus delta variant beginning in early August had a negative impact on the travel and tourism sectors and subsequently hurt the nascent rebound in gaming operations. Prior to the slowdown, management had released promising 1H:21 results. Shares also continued to be pressured by general concerns around the Chinese government’s intensifying regulatory scrutiny of a growing number of industries. The Team investment case in Galaxy Entertainment remains centered around an eventual return to normality in Macau post-pandemic, where Galaxy is viewed as dynamic and maintains a strong balance sheet.
+ Amsterdam-based Prosus, a global technology investment company, also detracted. The company recently completed a share swap with its parent company, South Africa–based Naspers. Shares of Prosus traded lower in the month, largely driven by the underperformance of Tencent, which continues to feel the effects of the Chinese government’s regulatory crackdown. The Team believes Prosus remains attractively valued with a wide spread between net asset value and share price.
CONTRIBUTORS +
Asahi Group, a Japan-based manufacturer of alcoholic beverages, soft drinks and food products, contributed after reporting a significant year-over-year improvement in profit and earnings per share; core operating profit also rose substantially. The Team
August, 2021
In August, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 3.09% in Australian dollar terms.
DETRACTORS + South Africa–based investment company Naspers detracted, largely driven by the underperformance of its main investment, China-based internet company Tencent, which continued to be pressured by increased regulatory scrutiny by the Chinese government. Despite having other offerings in addition to its Tencent stake, Naspers trades at a discount to the value of its Tencent exposure and recently initiated a plan to reduce that discount via a complicated share swap with its subsidiary, Prosus. During the month, Prosus announced that all conditions of the offer had been met and the cross-holding structure would proceed.
+ Alibaba Group detracted as fallout from China’s heightened regulatory scrutiny continues to affect Chinese e-commerce companies. Over the longer term, the Investment Management Team (the Team) views Alibaba’s linked ecosystem, with best-inclass data analysis, infrastructure and omnichannel offerings, is well positioned to provide increasing value for both consumers and merchants. The Team maintains Alibaba on its compelling long-term valuation.
CONTRIBUTORS + ABN AMRO, a Dutch bank offering a wide range of financial services to retail, private banking and corporate clients, contributed. The bank reported strong second-quarter results, which included net profit that handily beat analyst expectations, supported by relaxed coronavirus restrictions and more widespread economic reopening. The release of pandemicrelated loan loss provisions also helped offset a decline in net interest income. Management announced that it would resume dividend payments on the strength of favorable second-quarter results. The Team expects that ABN AMRO will benefit from the continuing economic recovery in the Netherlands, and as demand for corporate loans accelerates. The Team’s investment case is supported by compelling valuation and superior capital base.
+ Goldman Sachs continued to trade higher as the economic recovery expanded, prompting a surge in mergers and acquisitions activity. The global investment bank and financialservices giant released second-quarter earnings that included a significant increase in profits and earnings per share, as well as favorable year-over-year comparisons. The Team believes Goldman Sachs exhibits high levels of profitability and trades at an attractive valuation versus its banking peers
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/179255330.pdfJuly, 2021
In July, the Fund outperformed its benchmark, the MSCI All Country World Index, which was up 2.84% in Australian dollar terms.
CONTRIBUTORS + Shares of Service Corporation International continued to rise, driven by strong earnings and significant revenue growth as the company continued to benefit from the pandemic. Demand for funeral and cemetery services increased rapidly due to higher mortality rates, accelerating returns for the company during the past year. As vaccinations increase and mortality rates fall back to pre-pandemic levels, revenue growth is expected to return to more normal levels. The Portfolio’s Investment Management Team (the Team) invests in Service Corporation International based on a strong and leading market position with structural tailwinds from demographics.
+ Otis Worldwide, a US-based company that develops, manufactures and markets elevators, escalators, moving walkways and related equipment contributed. The company beat second-quarter earnings and revenue estimates on the back of increases in new equipment sales as its end markets continue to recover. As a result, management raised FY:21 guidance and increased its share buyback target to US$750 million. The Team continues to view Otis as a leader in a consolidated market, with structural growth opportunities from emerging markets and urbanization.
+ US-based commercial real estate firm CBRE rose sharply at the end of July after releasing stronger-than-expected second-quarter earnings that significantly exceeded analyst estimates. The company also announced it would acquire a majority interest in and form a strategic partnership with London-based Turner & Townsend, a major global manager of infrastructure and real estate construction projects. CBRE is buying the stake to improve its ability to provide alternative energy infrastructure as corporate real estate owners and tenants continue to prioritize carbon neutrality and greenenergy initiatives. The Team finds CBRE attractively valued and well positioned for structural growth in corporate outsourcing of facility management.
DETRACTORS + Galaxy Entertainment, a leading casino resort operator headquartered in the gaming hub of Macau, detracted as the gaming industry continues to rebound slowly and revenue remains below pre-pandemic levels. Shares were also pressured as general concerns around the Chinese government’s intensifying regulatory scrutiny of the technology and education industries spilled over into other sectors. The Team’s investment case in Galaxy Entertainment remains centered around an eventual return to normal in Macau, where Galaxy is viewed as best in class. The Team believes Galaxy’s balance sheet is strong and provides
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/175523806.pdfJune, 2021
In June, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 4.47% in Australian dollar terms.
DETRACTORS + Anthem detracted despite raising guidance for FY:21 profit and revenue and releasing strong 1Q:21 results that exceeded expectations. Investor concern around Anthem’s ability to offset accelerating medical loss ratios as healthcare demand normalizes post-pandemic has increased somewhat. Anthem’s enrollment base continues to expand, its Medicaid and Medicare business lines are strong, and it recently launched its IngenioRX pharmacy offering. The Team’s investment case in Anthem is supported by superior earnings growth at attractive valuation.
+ Shares of Netherlands-based electronics company Philips fell on news that it would recall up to four million ventilators and breathing machines after identifying potential health risks. The issue was identified after the release of its 1Q:21 earnings report, which included higher-than-expected sales growth and offered positive guidance. Management expects to take a US$605 million hit to income but does not expect the issue to affect FY:21 revenue projections, as results from other business segments should offset the impact. The Portfolio’s Investment Management Team (the Team) maintains Philips based on structural growth, and it being one of the cheapest names in the developed-market medical-technology space.
+ Cognizant, a leading provider of information technology, consulting and business process services, declined as shares remained under pressure after reporting a strong first quarter and raising guidance, though less than had been anticipated. Cognizant continued to benefit from the pandemic-related demand for digital transformation and recently launched a business group, which will work exclusively with Google Cloud to collaborate on the development of innovative solutions for retail, life sciences, healthcare and financial services. The Team continues to view Cognizant as attractively valued, compared with its peers.
CONTRIBUTORS + Roche was positively impacted by the US Food and Drug Administration’s surprise approval of competitor Biogen’s controversial treatment for Alzheimer’s disease, aducanumab, the first treatment to slow the course of the disease. The FDA’s approval of aducanumab appears to allow a much-easier-thanexpected path to market for competing Alzheimer’s therapies. Roche has one of the other two Alzheimer’s therapies t
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/174342160.pdfMay, 2021
In May, the Fund outperformed its benchmark, the MSCI All Country World Index, which was up 1.34% in Australian dollar terms.
Japan-based brewer Asahi Group contributed as the reopening of restaurants and bars reinvigorated sales. Asahi has exclusive rights to sell alcoholic and nonalcoholic beverages at the Tokyo Olympic Games; however, uncertainty remains regarding attendance and onsite food and beverage service. Management also announced an aggressive program to reduce debt and pause overseas investments as it focuses on the integration of its acquisition of the Australian operations of Anheuser-Busch InBev. The portfolio’s Investment Management Team (the Team) invests in Asahi Group for its attractive valuation, both relative and absolute.
+ Shares of Anthem continued to show strength following the release of 1Q:21 results that exceeded expectations. Management raised guidance for FY:21 profit and revenue, citing its growing enrollment base, strong results in its Medicaid and Medicare business lines, and expansion of its new IngenioRX pharmacy offering. The Team maintains Anthem on the back of compelling valuation.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/172532155.pdfJanuary, 2021
In January, the Fund underperformed its benchmark, the MSCI All Country World Index, which was up 0.12% in Australian dollar terms.
DETRACTORS:
+ Health insurance provider Anthem declined after the release of its 4Q:20 earnings report, which disappointed investors. While Anthem exceeded revenue estimates as a result of increased membership and reported improved medical loss revenue, COVID-19-related testing and treatment expenses had a negative impact on its bottom line. Anthem is well positioned post-pandemic, supported by expansion of its Medicare Advantage and Medicaid programs as well as strong growth in its IngenioRx pharmacy benefits management unit. The portfolio’s Investment Management Team (the Team) investment case in Anthem is supported by expected earnings growth and compelling valuation.
+ Shares of information technology consulting and outsourcing firm Cognizant moved slightly lower in the month ahead of its 4Q:20 earnings release in early February. While the company has continued to turn in strong earnings supported by the pandemic-related acceleration of cloud migration and a shift to digital business models, year-over-year comparisons have been challenging. Under its new CEO, Cognizant has accelerated its acquisition strategy and recently announced plans to acquire Servian, an Australian analytics firm. The Team continues to view Cognizant as attractively valued compared with its peers.
+ Visa detracted as the company reported earnings per share and revenue that came in ahead of analyst expectations but disappointed on a year-over-year basis. Cross-border spending remained challenged by pandemic-related restrictions, falling 33%, excluding activity between European countries, and core purchase volumes continued to struggle given exposure to travel, entertainment and luxury goods. Debit and e-commerce volumes were up considerably, having accelerated under lockdowns. The Team believes that negative trends are pandemic driven and that continued strength in debit and e-commerce shows the resilience of Visa’s broader product portfolio.
CONTRIBUTORS:
+ South Africa–based investment company Naspers contributed on the strength of its main underlying asset, China-based internet company Tencent. Shares of Tencent rose as concern ebbed over the effect that increased regulations designed to prevent monopolistic behavior by e-commerce companies might have on its operations. The Team believes Tencent’s core online-gaming and social-media businesses fall out of the scope of the proposed regulations.
+ Julius Baer, a Swiss private bank, performed well on the back of a substantial rise in net profit for FY:20, driven by strong financial markets’ performance and brisk client trading. The Team’s investment case for Julius Baer continues to link to its unique exposure to global wealth creation.
+ Shares of Alphabet rose in anticipation of its scheduled 4Q:20 earnings release in early February. Online advertising revenue is expected to build on a positive third quarter, and the company will also release results from its cloud computing segment, which continues to show strong revenue growth and gain market share.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/164900167.pdfasset_class: Foreign Equity
asset_category: Large Blend - Fundamental
peer_benchmark: Foreign Equity - Large Fundamental Index
broad_market_index: Developed -World Index
manager_contact_details: Array
ticker: ACM0009AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://web.alliancebernstein.com/funds/au/equity/global-equities.htm
fund_features:
AB Global Equities aims to achieve returns in excess of the MSCI All Country World Index in Australian dollars, after fees, over the medium to long term.
- Investing in equities anywhere in the world including developed, emerging and frontier markets.
- The Fund will principally be comprised of equity securities of companies considered by the investment manager to offer good prospects for attractive returns relative to general equities markets.
structure: Managed Fund