December, 2020
The Fund performed broadly in line with the benchmark in December. Our holding in Oracle outperformed this month after delivering better than expected second quarter results. Whilst top line growth remains muted, it was ahead of expectations and the business continues to transition away from on premise to a cloud strategy along with the accompanying recurring revenue streams. Their autonomous data base product, as previously guided is unique to the market and gaining traction with customers. The growth in the app business also appears to be at the expense of the competition.
Operating costs have been further reigned in, and the company continue to buy back shares resulting in better than expected earnings per share growth. Management were confident on the outlook for the business going into 2021, and we believe current valuation does not give the company credit for what is increasingly looking like a successful transition from an on premise technology company to one in which in its primary products are offered via the cloud. After months of speculation the US Federal Trade Commission (FTC), along with a coalition of 45 State Attorney Generals’ filed a lawsuit against Facebook in December.
As a result the company was an underperformer in the fund this month; down ~1.5%. The FTC allege illegally maintained monopoly power through anticompetitive conduct which highlights the firm’s acquisition of both Instagram & WhatsApp. Whilst we do not profess to be experts in US competition law, we note that both acquisitions were approved by regulators in 2012/2014. Whilst we believe that existing laws regulating the technology sector are not “fit for purpose”, we believe it will be difficult for regulators under the current law to unwind transactions that have been previously approved after lengthy regulatory scrutiny.
We would prefer to see global regulators, politicians and industry leaders come together to form a consensus for a sensible regulatory framework which provides for consumer protection, and consumer choice whilst not inhibiting innovation and technological advancement. The FTC litigation will likely be a prolonged event, however in the interim it is pleasing that Facebook have prioritised discussing and solving for some of the challenges faced by running a global technology company with more than 2.5bn monthly active users. Our holding in Discovery Communications outperformed in December after hosting an investor day in December. Company management outlined a direct to consumer (DTC) strategy which will transition their business from a purely traditional pay tv distributor.
As of January 2021, Discovery will launch discovery+, a DTC service offered in two tiers (add supported & and ad free). Discovery have a library of content of 300+ hours of non fiction programming with notable offerings that span across lifestyle, home, food, natural history and science programs. The DTC offering will launch with over 55000 episodes and 50 original series. discovery+ will be rolled out across 25 international markets over the course of the year, leveraging the largest global offering of unscripted content . We met with management at the end of 2019 where they outlined a strategy to build out their owned content in preparation for a launch of a DTC offering and we have been impressed with progress to date. We look forward to the next step; monetising the opportunity.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/163694960.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: BTA0503AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://investmentcentre.moneymanagement.com.au/factsheets/mi/c3rz/bt-concentrated-global-share
fund_features:
Pendal Concentrated Global Share aims to provide a return (before fees, costs and taxes) that exceeds the MSCI World ex Australia (Standard) Index (Net Dividends) in AUD over the medium to long term. The Fund is designed for investors who want the potential for long term capital growth from a concentrated portfolio of global shares, diversified across a broad range of global share markets and are prepared to accept higher variability of returns. The Fund invests in global companies that offer attractive investment opportunities predominately in markets such as the USA, UK, Continental Europe, Asia and Japan. The Fund may also hold cash and use derivatives.
structure: Managed Fund