September, 2023
The portfolio recorded a negative return for the quarter in Australian dollars. The biggest contributors included the investments in technology companies Intuit and Alphabet, as well as defensive retail giant Costco. Intuit reported solid results and issued FY24 guidance that highlighted the resilience of its business model. Intuit also showcased how it will incorporate AI into its product suite and the associated benefits. Alphabet benefits from the easing of concerns about Search disruption from AI / ChatGPT. Alphabet also reported solid results demonstrating stable trends in advertising and continued cost control. Costco reported a solid 4Q result highlighting its resilience/ defensiveness in a tough consumer environment. The result was characterised by sustained strong underlying membership growth, reasonable but normalising retail sales growth, and steady Retail EBIT margin.
The biggest detractors in the quarter include ASML, Hermès and LVMH. Continued softness in overall semiconductor demand (notwithstanding strong AI investments) has weighed on industry sentiment and ASML. Tool makers like ASML have also been impacted by Taiwan Semiconductor Manufacturing Company pushing out orders for its Arizona fab due to talent shortages, and rumours of further order delays given end-market weakness. During the quarter, the luxury sector, including Hermès and LVMH, de-rated as the market became more fearful of the combined impact of a growth normalisation in the US and a slower-thananticipated recovery in Chinese consumer spending.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/MFGCS-MCSG-Retail-Factsheet-September-2023-MCSG45199.pdfJune, 2023
• A portfolio of high-quality securities that is actively constructed and rebalanced quarterly
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• Rebalanced quarterly, and continuously monitored, to ensure relevant and updated views on quality, value and risk
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March, 2023
The portfolio recorded a positive return for the quarter in Australian dollars. The biggest contributors included the investments in Salesforce, Hermès and Apple. Salesforce fell out of favour last year during the tech re-rate as the market lost confidence in the long-term margin potential of the company and became impatient with management’s lack of historical track-record around driving profitability. During the quarter, Salesforce announced significant cost-out initiatives and committed to a share repurchase program that restored the market's confidence in Salesforce's profitability potential and indicated a shift in management’s focus towards profitable-growth and investor friendly capital allocation. Hermès performed well as its exposure to the reopening of Asia, especially China, gained momentum. Hermès stands to be a key beneficiary of pent-up demand for luxury and travel amongst Chinese consumers. Apple too performed well, benefiting from the flight to quality amidst the volatility caused by the banking crisis and the opportunities from the China reopening.
The biggest detractors in local-currency terms were the strategy’s holdings in Home Depot, Dollar General and John Deere. Home Depot's performance in the quarter was owing to weaker-than-expected financial performance in quarterly results, its outlook for FY23 and weakening sentiment for home improvement retailing given the outlook for the economic cycle. Dollar General underperformed following downgrades to company guidance due to challenges for low-income consumers and strategic investments. John Deere underperformed, with the strong quarterly results offset by peer weakness.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/MFGCS-MCSG-Retail-Factsheet-March-2023-MCSG45016-V2.pdfJanuary, 2023
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/MFGCS-MCSG-Retail-Factsheet-January-2023-MCSG44957.pdfDecember, 2022
The portfolio recorded a positive return for the quarter in Australian dollars. The biggest contributors included the investments in Nike, Yum! Brands and Adobe Systems. Nike outperformed after weakness in prior quarters. Nike's quarterly result exceeded expectations, with positive commentary and results on margins and inventory normalisation. Yum! Brands' performance was supported by strong earnings and an Investor Day that reinforced the sustained long-term growth potential for the company. Adobe also had a better-than-expected quarterly result, with strength in Digital Media and Creative Cloud offsetting recent investor concern on competition and growth durability.
The biggest detractors in local-currency terms were the strategy's holdings in Amazon, Alphabet and Airbnb. Amazon missed expectations, with a cyclical slowdown impacting margins and growth. In addition, guidance for 4Q22 results was below expectations as the company expects higher costs, including energy, to more than offset its ramping productivity efforts in the near term. These headwinds are transitory, and we retain confidence in the growth and competitiveness of Amazon's businesses over the medium term. Alphabet's share price reflected a combination of the cyclical challenge of slowing advertising revenue growth and contracting margins given investments and underwhelming cost control. Airbnb underperformed, with management's quarterly guidance below market expectations.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/MFGCS-MCSG-Retail-Factsheet-December-2022-MCSG44926.pdfSeptember, 2022
The portfolio recorded a positive return for the quarter in Australian dollars. The biggest contributors included the investments in Starbucks, PayPal Holdings and Amazon.com. Starbucks gained after bullish revenue growth guidance at its long-awaited investor day. Howard Schultz, the company's driving force and interim CEO, predicted "the best days of Starbucks are ahead of us". PayPal surged after saying activist investor Elliott Investment Management is one of its biggest shareholders and that cost-cutting will save US$900 million this fiscal year and US$1.3 billion in the next one. Amazon rose after reporting second-quarter revenue that beat estimates and predicted sales could rise 17% in the current quarter thanks to third-party selling.
The biggest detractors in local-currency terms were the strategy's holdings in Adobe Systems, Nike and Alphabet. Adobe underperformed following the announcement of a strategic acquisition in the Creative Cloud space, with the market concerned about competition and growth durability.
Nike underperformed during the quarter, facing challenges from continuing covid-19 disruption in China, their largest growth market, intensifying currency headwinds, and rising concerns about excess inventory and discounting activity in North America and Europe. Alphabet, the owner of Google, fell as a slowing economy led to fears of a downturn for advertising, and higher rate expectations disproportionately affected long-duration growth companies.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/MFGCS-MCSG-Retail-Factsheet-September-2022-MCSG44834.pdfJune, 2022
The portfolio recorded a negative return for the quarter. Among the biggest detractors, as a rise in government bond yields applied a greater discount to future profits, were the investments in Airbnb, Netflix and Amazon. Airbnb fell as a larger discount rate was applied to a company considered high growth. Netflix fell on a decline in its subscribers in its first quarter result and weak guidance on subscribers and future pricing growth potential. Amazon declined after the online retailer saw cost headwinds impacting its retail business.
The biggest contributors, as defensives outperformed cyclicals, were the investments in Kweichow Moutai of China, McDonald’s, and Colgate-Palmolive. Kweichow Moutai’s quarterly result beat expectations given strong volumes and pricing outcomes in its direct-to-consumer e-commerce platform. McDonald’s saw strong demand trends drive revenue ahead of market expectations and ColgatePalmolive, saw a re-rate of its price-earnings ratio due to extrapolation of signs of improving execution in North America and accelerated pricing in the face of a challenging cost environment.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/MFGCS-MCSG-Retail-Factsheet-June-2022-MCSG44742.pdfMarch, 2022
The portfolio recorded a negative return for the quarter. The biggest detractors were the investments in Meta Platforms, Starbucks and Heineken. Meta fell after the owner of Facebook offered only a weak revenue forecast due to Apple privacy restrictions inhibiting the reach and effectiveness of its advertising and its Facebook site suffered its first drop in regular users in part due to the popularity among the young of TikTok. Starbucks slid on reduced guidance tied to its business in China where covid-19 is prompting lockdowns and higher wage costs in the US. Heineken dropped on exit from its Russian operations and risk that inflation might hurt profitability. The biggest contributors were the investments in Deere & Co, Deutsche Böerse and Pernod-Picard. Deere rallied on another impressive quarter – revenue topped US$9.5 billion for the three months to January 31. Deutsche Böerse gained given higher rate expectations are favourable to volumes on the platform. Pernod outperformed other alcohol players as it has limited exposure to Russia and Ukraine and inflation headwinds facing other players.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/MFGCS-MCSG-Retail-Factsheet-March-2022-MCSG44651.pdfDecember, 2021
The portfolio recorded a positive return in the quarter. The biggest contributors included the investments in Home Depot, CME Group, Union Pacific Railroad and Microsoft. Home Depot gained after the home-improvement chain announced results for the September quarter that topped expectations. CME rose as trading volumes benefited from higher expectations of interest rate changes and greater volatility in energy markets. Union Pacific surged on impressive third-quarter results that showed rising margins. Microsoft surged on a 22% jump in revenue for the third quarter as its cloud business benefited from the global shift to remote work.
The biggest detractors were the investments in Alibaba Group, PayPal Holdings and Medtronic. Alibaba dropped after the Chinese tech company announced sales figures that disappointed for a second straight quarter and lowered its fiscal outlook for 2022, which fanned concerns about slowing consumer spending in China. Still, Alibaba announced a 29% rise in revenue for the September quarter and forecast 20% to 23% growth in fiscal 2022 revenue, rather than the 27% analysts were expecting. PayPal traded down in the quarter after reaching all-time highs earlier in the year amid concerns about disruption and weaker guidance than expected. Medtronic underperformed due to delays in several key pipeline products.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/MFGCS-MCSG-Retail-Factsheet-December-2021-MCSG44561.pdfSeptember, 2021
The portfolio recorded a positive return for the quarter. The biggest contributors were the investments in Alphabet, MSCI and Costco Wholesale. Alphabet surged after the parent of Google posted a higher-than-expected profit of US$21.7 billion in the June quarter after online advertising rebounded. MSCI rallied on a strong quarterly result where resilient markets, strong inflows and margin expansion were the highlights. Costco's quarterly results exceeded market expectations as revenues, tax and margin improvement contributed.
The biggest detractors were the investments in Alibaba Group and Tencent Holdings of China and Kering of France. Alibaba dropped after Chinese authorities cracked down on tech with a focus on antitrust and security issues. Tencent slumped amid this crackdown that restricts gaming by children and saw the cyber-regulator fine the company for sexually suggestive content while antitrust authorities fined Tencent for unfair practices and ordered the company to end exclusive musiclicensing deals. Kering, which owns Gucci and other luxury labels, slid as doubts about China's economy undermined luxury-goods companies dependent on China's expanding middle and upper classes for sales.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/MFGCS-MCSG-Retail-Factsheet-September-2021-MCSG44469.pdfJune, 2021
The portfolio recorded a positive return for the quarter. The biggest contributors were the investments in Alphabet, Facebook and Moody's. Alphabet rallied after the parent of Google reported that rising spending on digital ads boosted first-quarter sales to US$55.3 billion, a higher-than-expected rise of 34% from a year earlier. Facebook surged after firstquarter sales smashed expectations to rise 48% to US$26.2 billion as advertisers sought access to the social media platform's 2.9 billion users and a US judge unexpectedly dismissed two complaints against the social-media giant from the US regulator because the judge said the Federal Trade Commission failed to prove the company was a monopoly. Moody's rose after the rating agency's first-quarter earnings beat expectations as companies took advantage of favourable markets to issue debt, and subscription revenue rose.
The biggest detractors were the investments in Canadian National Rail, Hilton Worldwide Holdings and the internetbased travel agency Booking Holdings. Canadian National dipped on a US$29 billion merger with Kansas City Southern even though the deal gives the rail business access to Mexico. Hilton and Booking came under pressure late in the quarter as the Delta coronavirus variant led to the reintroduction of travel restrictions in Europe and likely delayed the relaxation of restrictions in other regions. In relative terms, the portfolio outperformed the benchmark over the quarter driven by the strong performance of luxury, sportswear, the large capitalisation technology platforms and non-interest rate-sensitive financials.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/MFG-MCSG-Retail-Factsheet-June-2021-MCSG44377.pdfasset_class:
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ticker: MGE3851AU
release_schedule: Quarterly
structure: Managed Fund
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https://www.mfgcoreseries.com.au/core-funds/mfg-core-international-fund/reports-and-announcements/
Commentary is only available Quarterly (March, June, September, and December) Reports.
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