September, 2023
• Positive contributors to performance for the month of September included our commodity holdings CNOOC, Arch Resources, Stanmore Resources, and Teck Resources.
• Detractors to monthly performance included Wynn Resorts, ING Groep, and Star Entertainment.
• No new positions were initiated during August, however additional purchases were made in Grupo Mexico and Charles Schwab Corp. We also took up our allocation in Star Entertainment’s rights issue, increasing the position size.
• No positions were exited during the period, however we trimmed our position in JP Morgan.
• The gross invested position at month’s end closed at 102%, with a net equity position of 88%
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-September-2023.pdfAugust, 2023
• Positive contributors to performance for the month of August included Apollo Global Management, CNOOC, Shell plc, ING Group and Arch Resources.
• Detractors to monthly performance included Bank of America, Siemens AG, Wells Fargo, Freeport McMoRan and Sands China.
• Currency positioning also had a negative impact on performance relative to the MSCI Global (AUD). The Fund’s currency positioning is actively managed and at the end of August the three largest currency exposures were Australian Dollar (83%), British Pound (8%) and Hong Kong Dollar (6%). In August the Australian Dollar declined ~4% against the US Dollar which accounts for almost 70% of the MSCI World Index.
• No new positions were initiated during August, however additional purchases were made in Heineken Holdings as well as recently initiated Grupo Mexico.
• No positions were exited during the period however out of the money call options were sold on Apollo Asset Management reducing our effective position and providing an exit point in the event of a further increase in the share price.
• The gross invested position at month’s end closed at 106%, with a net equity position of 94%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-August-2023.pdfJuly, 2023
• Positive contributors to performance for the month of July included Bank of America, CNOOC Limited, ING Group, Apollo Global Management and Teck Resources.
• Detractors to monthly performance included CaxiaBank, Cairn Homes, Heineken Holdings, SPIE and Star Entertainment.
• Two new positions were initiated during July, Grupo Mexico and Arch Resources. Both positions add to the portfolio’s commodity position. Grupo Mexico is a holding company with two main businesses, a majority 90% stake in Southern Copper and a 70% stake in Grupo Mexico Transportes, the largest freight rail operator in Mexico. Arch Resources is a metallurgical coal producer operating in the Appalachian region of the United States.
• No positions were exited during the period however out of the money call options were sold on Freeport McMoRan reducing our effective position and providing an exit point in the event of a further increase in the share price.
• The gross invested position at month’s end closed at 106%, with a net equity position of 93%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-July-2023.pdfJune, 2023
• Positive contributors to performance over the month of June included Apollo Global Management, Freeport McMoRan, Teck Resources, ING Group and CaxiaBank.
• Detractors to monthly performance included Apple (short), Lloyds Banking Group, McDonalds (short), Siemens and Aalberts.
• There were no new positions initiated during June, however the Fund completed the purchase of an initial position in European industrials company Aalberts, which was initiated in May. The Fund’s existing position Bank of America was increased.
• Oracle was exited during the period after the recent strong performance saw the share price reach our target. Weightings in Teck Resources and Siemens were reduced.
• The gross invested position at month’s end closed at 106%, with a net equity position of 94%
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-June-2023.pdfMay, 2023
The portfolio returned -3.3% over the month whilst the MSCI Word Net Total Return Index (AUD) returned 1.1%.
• Positive contributors to monthly performance included Apollo Global Management, Applus Services, Glenveagh Properties, Oracle Corporation and ING Groep.
• Detractors to monthly performance included Teck Resources, Wynn Resorts, Shell, MGM China and CNOOC Limited.
• We added new positions in Intesa Sanpaolo, Charles Schwab Corp and a European industrials company which will be disclosed during the upcoming quarterly once completed.
• Positions in MGM China and Stanmore Resources were increased.
• No positions were exited during the period.
• The gross invested position at month’s end closed at 103%, with a net equity position of 96%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-May-2023.pdfApril, 2023
Teck Resources, the portfolio’s largest commodities position, rose materially after disclosing the receipt of a merger proposal from Glencore. Interest in Teck Resources has been triggered by the company’s February announcement that it would look to separate its industrial metals and steelmaking coal businesses. We have been vocal in our opposition to Teck’s proposed separation, and we were pleased to see the shareholder vote was withdrawn from its recent AGM after it became clear the company did not have the requisite support.
We continue to believe Teck’s assets are being undervalued by the market and Glencore’s interest supports this view. Flutter Entertainment gained after the UK’s long-delayed Gaming Act Review was officially published. The review’s key recommendations were in line with what had been flagged in press reports in the weeks leading up to its release with no adverse recommendations taking investors by surprise.
The Gaming Act Review has acted as an overhang for the UK gaming sector since mid-2020 when it was initiated. It has also created an unlevel playing field between large operators like Flutter who have proactively self-regulated and smaller operators who have not. We think this benefits Flutter moving forward.
File:March, 2023
The portfolio returned 4.6% over the quarter. Our positions in European industrials and gaming were positive contributors while our US financials holdings detracted from performance.
US bank holdings were impacted by the collapse of Silicon Valley Bank and Signature Bank which sparked fear within the market and led to broad-based selling of the sector. Below we assess what happened to Silicon Valley Bank and the comparability (or lack thereof) to our US bank holdings. Silicon Valley Bank collapsed due to a mismatch in its assets and liabilities. Like at most banks (including the Australian banks), Silicon Valley’s liability book (deposits) was generally on-demand, meaning that deposit holders could withdraw their funds without notice. Their asset book was mostly longer dated fixed income securities including government-guaranteed mortgage-backed securities.
The securities carried low credit risk but were bought during the pandemic at a time of low interest rates, so were less valuable in today’s higher rate world and thus carried mark-to-market losses. The mark-tomarket losses on securities would only prove problematic if a run on deposits required Silicon Valley to liquidate the securities and realise the losses – which is what happened.
File:February, 2023
In late February diversified miner Teck Resources announced a transaction to spin-off its steelmaking coal assets into a separately listed company, leaving the core copper and zinc business in the to-be-renamed Teck Metals. Rumours circulated in the media the week before and the stock appreciated as much as 10 percent on the news. When the details were ultimately announced, the stock gave up all those gains and more. We agree with the concept of separating the assets but, like the market, not the details – for the next decade or so the newly created steelmaking coal entity will remit most of its free cash flow back to the base metals company via a complex royalty and preferred equity structure. In our view the transaction is a separation in name but not substance, and we have spoken to Teck’s management team on the issue. The transaction goes to a shareholder vote in April.
We maintain our holding in Teck Resources as its assets & earnings are strong, and its valuation remains compelling. We are conscious however that should the transaction go ahead it will be more difficult for Teck stock to achieve a full & fair valuation in the next three to five years.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-February-2023.pdfJanuary, 2023
Macau gaming and commodities, two sectors sensitive to China’s reopening, continued to outperform in January as investors recalibrated expectations for growth in the world’s second largest economy. The Chinese New Year period saw visitation to Macau exceed expectations. Amongst our commodity holdings we increased our position in CNOOC after the company’s annual strategy day reinforced the strong fundamentals underlying the business, as well as management’s commitment to its shareholder returns policy.
European banks began reporting full year earnings and as expected, higher interest rates are driving substantial increases in net interest revenue and ultimately profitability. While stock prices have been rising over the last couple of months, European banks continue to trade on around 8 times earnings, sub 1 times book value while paying 6% dividend yields on a 50% payout ratio. The low payout ratio provides ample capacity for buybacks that should push total annual shareholder returns into the low double digits.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-January-2023.pdfDecember, 2022
Our European bank holdings advanced over the month on the back of higher interest rates in the eurozone. These banks make their highest quality profits, over the cycle, from their deposit books and are beginning to see the benefits from the move higher in both the benchmark rate and the yield curve.
The return of positive rates should provide banks with higher quality earnings in the medium term, as they begin the process of repricing both their loan and liquidity books. Sentiment is also improving on the back of increasing dividend payouts and buybacks. Macau casino holdings Sands China and MGM China continued to advance in December, benefiting from increased investor appetite after the removal of license renewal risks and growing evidence China has moved away from its COVID-zero policy. Star Entertainment offset some of these gains after NSW Treasurer Matt Kean, announced plans to increase taxes on casino table and EGM revenues from July 2023.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-December-2022.pdfNovember, 2022
Industrial Siemens AG reported excellent results despite the perceived economic slowdown. The primary driver is the factory automation business, which grew revenue by 13% this financial year and has guided to grow at a similar rate in the coming year. Increasing labour costs, escalating geopolitical sensitivity around global manufacturing chains, and the rearranging of automotive factories to produce electric vehicles are longterm trends that benefit Siemens and are increasingly showing up in their order books.
Macau casino holdings advanced after two important catalysts emerged in November, namely the potential relaxation of China’s COVIDzero policy and Macau’s government announcing all six existing operators were receiving new concessions. Global sports betting and gaming operator, Flutter received a positive outcome from its long-standing arbitration with FOX Corp. regarding the latter’s option to acquire a minority interest in FanDuel. In a major win for Flutter the arbitrator set FanDuel’s valuation at $20b, compounding at 5% pa, well above the $11.2b FOX Corp. had argued. Regarding our currency positioning, we took advantage of a sell-off in the Australian dollar in early November to increase our exposure to 80% from 74%. The Australian dollar rose strongly over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-November-2022.pdfOctober, 2022
The portfolio had a strong month up 8.8%. Our United States bank holdings reported good third-quarter results as higher interest rates are quickly flowing through to the bottom line. Bank of America’s results were particularly strong – its capital ratio is up, expenses are flat despite the inflationary environment, and the franchise attracted the highest number of new retail checking accounts in over 15 years. Across the industry, provisions for customer defaults are still benign and while we expect them to shift higher in the coming year, they remain well below historical levels.
Valuations are attractive and unlike many sectors of the market, the banks are upgrading forward earnings estimates. Airbus was particularly strong over the month with its share price rising ~23%. While management reiterated guidance for operating earnings and increased its free-cash flow generation guidance for 2022, the most pleasing aspect of the update was on deliveries. Despite on-going supply chain challenges, management reiterated its aim to deliver 65 and 75 planes per month of the A320 family by 2024 and 2025 respectively. We believe Airbus is in a multi-year sweet spot driven by rising production of its very popular A320, tailwinds from a strong US dollar and the absence of any new major development programs which will drive strong free-cash flow generation.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-October-2022.pdfSeptember, 2022
Our European interest sensitive banks including the Spanish and Irish banks performed strongly over the month as the market begins to focus on the impact of higher rates on European bank earnings. While generally unthinkable just a few months ago, Eurozone inflation hit a record high of 10% in September, reinforcing expectations for another large interest rate hike from the ECB in October. As we have previously indicated, every 1% change in European rates leads to a 20-25% increase in European bank earnings. Our Macau casinos also performed strongly after it was announced that mainland China will reinstate both package tours to Macau and eVisas under the Individual Visit Scheme (IVS), two travel programs which have been suspended since the start of the pandemic. Prior to COVID-19 the vast majority of mainland China visitation to Macau entered via one of these two programs and a resumption should drive material improvement in visitation. Apollo Global Management negatively impacted the portfolio over the month as it fell ~16%. While company fundamentals remain resilient, the sharp jump in interest rates and heightened recessionary fears has resulted in multiple contraction with Apollo now trading on less than 8x 2023 forecast earnings, in an environment where it continues to grow its business between 10 and 15% plus pa.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-September-2022.pdfAugust, 2022
The portfolio returned 0.4% during the month of August compared to the market falling 2.5% as investors worry about aggressive interest rate hikes from global central banks. Teck Resources was up 15% on a rebound in the metallurgical coal price. While steel markets were weak, the metallurgical coal market is finding support from the thermal coal market and the European energy crisis. Certain grades of metallurgical coal are suitable substitutes for thermal coal. Various publicly listed miners disclosed that they are shifting spot cargoes into the thermal markets - achieving higher prices and helping to rebalance the metallurgical market. Flutter Entertainment advanced 31% after interim results again highlighted the strength of it’s position in the fast-growing North American sports betting and igaming market. Flutter’s North American operations achieved EBITDA breakeven in Q2 making them the first major operator to achieve the milestone. The result was even more impressive considering Flutter continues to invest meaningfully into product and customer acquisition to grow market share. Flutter held a 51% share of sports betting GGR in Q2 and its FanDuel brand was the market leader in 13 of 15 states where it has a presence.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-August-2022.pdfJuly, 2022
The Fund returned 3% in July. Various holdings contributed to performance, but it is difficult to pick a standout as improving market sentiment trumped stock-specific factors. Quarterly earnings reports were generally good, and only minor changes were made to the portfolio. Mineral resource holdings Teck and Freeport McMoran announced large buybacks, as did integrated energy company Shell. Shell increased its quarterly buyback to $6b which implies it will be buying around 30% of daily traded volume in the coming quarter. Discussions with the CEO highlight its view that prioritising buybacks when its shares are cheap will eventually lead to a significant dividend per share increase, which should support the further stock price appreciation.
In their second quarter earnings calls management teams at our US bank holdings reiterated that, while parts of the American economy are softening, they observe few signs of deteriorating credit. Credit losses are at decade-lows and management teams unanimously claim that credit books are lower risk than historically. Market expectations, however, are for 2023 and 2024 credit losses at certain banks to exceed normalized levels, a full reversal of the current state. We cannot be sure where the American economy might head but even in a scenario of higher credit losses, bank valuations remain attractive, below ten times earnings
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-July-2022.pdfJune, 2022
A challenging June quarter saw the Fund finish the Financial Year down -0.9% compared to the MSCI World (AUD) which was down -6.5% over the same period.
Growing recession fears triggered a sharp selloff over the quarter, with the correction accelerating noticeably in the latter stages of June. Inflation data continues to come in above expectations, leading to a more aggressive policy response from central banks around the world. During the month of June alone, the Bank of England increased interest rates by 25bps, the Reserve Bank of Australia by 50bps, and the Federal Reserve by 75bps. With central bankers doubling down in their fight against inflation, interest rate increases are occurring at the same time that economic data and commentary from corporates suggest a broader slowdown is afoot.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Quarterly-Report-30-June-2022-Managed-Funds-1.pdfMay, 2022
Our top contributors in May included JP Morgan and some of our European banking names. Mid-month, JP Morgan hosted an investor day with the focus on investment in technology and the resulting cost efficiencies & benefits to customers. JP Morgan is gaining market share in most of its business areas and guided investors that this year it is on track to hit a 17% return on tangible equity. The stock was up 6% on the day.
Our European banking exposure reacted positively to rising Eurozone bond yields and interest rates expectations. Eurozone inflation soared to a record 8.1% in May, which is putting pressure on the European Central Bank to speed up the pace of its exit from ultra-loose monetary policy. Markets expect the Eurozone could end its eight-year experiment with negative rates by late 2022. As we have written about previously, negative rates have had a detrimental impact on European bank earnings and their reversal should lead to positive earnings revisions, with brokers estimating a 1% movement in rates could lead to a ~20% increase in profitability. Top detractors were our Macau casino holdings which continue to struggle amidst Chinese lockdowns and travel restrictions between China and Macau. We maintain our position.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-May-2022.pdfApril, 2022
At the end of April, we were mid-way through first-quarter earnings season and despite the drawdowns in some stock prices, our companies have reported good results. Our United States bank holdings were among the weakest performers during the month. While bank stocks trade swiftly and sharply on macroeconomic concerns such as flattening yield curve or end-of-cycle fears, among others, fundamentals look relatively strong.
Balance sheet compositions have changed dramatically over the last few years and Bank of America now finds itself with a low risk debt securities book (mostly US Treasuries, US government-backed mortgage securities, and central bank deposits) about twice the size of that three years ago, and materially larger than its loan book. Much of the book is in short-dated securities and as interest rates rise, Bank of America will promptly capture a higher interest rate on the book. We initiated a new position in global sports betting and online gaming operator Flutter Entertainment plc. Flutter owns market-leading products in the United Kingdom (Paddy Power Betfair, Sky Betting & Gaming), United States (FanDuel) and Australia (Sportsbet). We believe the business is ideally positioned to benefit from rapid growth of online sports betting and online gaming, particularly in the US. We will discuss Flutter in greater detail in our next quarterly update.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-April-2022.pdfMarch, 2022
The portfolio returned a pleasingly 5.3% in a turbulent quarter compared to the market down 8.2%. Our strongest performers included our industrial commodity and energy companies with the main detractors being ING Groep, Apollo Global Management and Siemens AG.
The Fund's largest overweight positions include Seven & I Holdings Co., Ltd., Merck & Co., Inc., and Allstate Corporation. Conversely, the Fund's largest underweight positions include Apple Inc., Microsoft Corporation, and Alphabet, Inc. Class A, all of which are not held in the Fund. With the outbreak of war in Ukraine, the portfolio's holdings in defence stocks Rheinmetall AG and BAE Systems plc were up firmly in the quarter as European governments recognised the need to spend more on their national defence given years of underinvestment. Rheinmetall is one of the leading defence contractors in Europe, with market-leading positions in land vehicles, large calibre weapons, and ammunition and electronic solutions. The company is a key supplier to the German army as well as a range of both NATO and non-NATO countries around the world. Similarly, BAE Systems plc is the largest non-U.S. defence contractor in the world and has a diversified portfolio with a strong technology focus covering air, land, and sea. BAE Systems plc performed strongly on the back of potentially higher defence spending, but also reported full-year 2021 numbers in the quarter with EPS and free cash flow ahead of consensus and guided free cash flow meaningfully over the next few years. We continue to hold both names as we see a compelling risk/reward profile.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/129_pfp-1.pdfFebruary, 2022
The portfolio ended February up 0.4% versus the 5.4% decline in the MSCI benchmark. Among the strongest performers were commodity holdings Freeport McMoran and Woodside Petroleum; among the weakest performers were bank ING Groep and Siemens AG. The stronger Australian dollar was a net detractor. ING was down sharply late in the month as war broke out in Ukraine. The market correctly recognised ING has a small exposure to Russia, less than one percent of assets (albeit a greater share of equity capital), but the stock traded down disproportionately. We maintain our position in ING. Siemens has negligible exposure to Russia and longer term such geopolitical events only highlight the tailwinds for its factory automation business, which provides hardware & software that make onshoring manufacturing more cost competitive. We added to our Siemens holding just after the month end.
Mid-month we sold our position in miner Barrick Gold as the stock spiked following an announced shareholder returns plan. Barrick was one of our smaller mineral resources holdings and traded at a valuation beyond that of base metal and diversified mining peers. Given current geopolitical events the stock may move higher, although as it stood when we sold in mid-February, we believed the valuation and riskreward were no longer compelling.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-February-2022.pdfJanuary, 2022
January performance was driven by our exposure to both banking and commodity positions. Standout performers include energy giant Shell (previously known as Royal Dutch Shell), up 15% over the month as the Brent oil price approached $90 per barrel. We entered a new position in Woodside Petroleum, the Australian liquid natural gas (LNG) producer, which trades on a midsingle digit earnings multiple and will benefit from any structural shortage in LNG supply longer term. European banks were also key contributors to the portfolio over the month. The driving factors behind the move higher was rising interest rates in Europe, coupled with various banks, including our portfolio holding Caixabank (up 22%), announcing they will return all excess capital to shareholders. Taking Caixabank as an example, this could result in up to a 15% implied yield over 2022 through dividends and buybacks.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-January-2022_1.pdfDecember, 2021
The portfolio returned 4.1% over the quarter. The main positive contributors were our positions in the copper companies Freeport McMoRan and First Quantum Minerals in addition to our position in alternative asset manager Apollo Global Management.
We initiated a position in Airbus, the European aerospace company, during the December quarter. The resurgence of COVID-19 due to the emergence of the new Omicron variant caused the shares to sell off sharply in late November, providing us the opportunity to acquire the position at an opportunistic price. Our investment thesis is based around Airbus becoming the market share leader in the world’s largest duopoly in a structurally growing market with increasing profit margins. In addition, the global COVID-19 pandemic has reinforced Airbus’ drive towards simplification with a focus on free cash flow generation. Its net cash, fortress balance sheet should lead to a more resilient company going forward.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Quarterly-Report-31-December-2021-Managed-Funds_0-2.pdfNovember, 2021
Markets had a sharp a sell-off in the last few days of the month as the World Health Organisation announced a new Covid-19 variant of concern, Omicron. Our European bank holdings were weak on lower interest rates. Ironically, in the same month the German ten-year bond yield declined from roughly negative 15 to negative 35 basis points, German consumer price inflation (CPI) rose 5.2% yearon-year, the highest rate in three decades. While difficult to rationalise the move in interest rates, bank earnings ultimately struggle in this environment as lower rates squeeze spreads on both their lending and liquid asset books. In the United States this dynamic is also true but not to the same extent, due to the banks having larger fee-based businesses. The Australian dollar also weakened to its lowest level relative to the US dollar over the last twelve months. The United States dollar may be the driving factor as we note other commodity and industrial currencies such as the Canadian dollar and Swedish krona exhibit similar behaviour even though commodity prices and industrial activity have been reasonably strong relative to history. Our Australian dollar exposure does not cost us per se but rather we do not capture the full benefit of stronger foreign currencies on our foreign holdings.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-November-2021.pdfOctober, 2021
Apollo Global Management hosted its investor day in October. The stock had traded sideways from May to the end of September as the market grappled with the change in management and the proposed merger with Athene. The investor day allowed Apollo to showcase both the strategic and financial benefits from the merger, complemented with attractive 5-year growth targets. At the end of September Apollo was trading on 10x pro-forma 2022 earnings. While it has now moved to 13x earnings post the 24% jump in the share price over October, we continue to believe Apollo stock represents compelling value for a high margin business, growing 15-20% pa with one of the best investment records in the industry. Upcoming catalysts to close the valuation discount include the completion of the Athene merger in January 2022, and the potential inclusion of the shares in the S&P500 index with the shift to a single share class structure.
Our increased exposure to the Australian dollar started to pay dividends in October with a material move up in Australian bond yields, stronger commodity markets and equity market strength, resulting in Australian dollar rising in value relative to the US dollar.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-October-2021.pdfSeptember, 2021
The portfolio ended September up marginally. Royal Dutch Shell, one of our largest positions, was the most prominent positive contributor. Shell appears set for a period of high shareholder returns due to increasing operating cash flow on the back of record liquified natural gas (LNG) prices in Europe & Asia, and a resilient oil price. Shell’s agreement to divest its United States shale oil production assets speeds up the energy transition and strengthens the balance sheet, while also allowing for further distributions to shareholders. Another positive contributor to the portfolio was a small position we held in Spanish elevator business Zardoya Otis, which was subject to a takeover offer by its majority shareholder OTIS Worldwide Corporation. The primary detractor was our position in the Macau gaming operators. The Macau government formerly commenced a review of the city’s gaming laws which precedes the upcoming license tendering process. The release of the public consultation document was negatively received by the market and our holdings sold off sharply. We will be discussing the issue in greater depth in the September quarterly
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-August-2021.pdfAugust, 2021
Industrial Siemens AG’s results stood out and our investment thesis – that unwinding the complex conglomerate structure would reveal the value of its high-quality industrial businesses - continues to play out. Major restructuring efforts are nearly finished, and management has raised earnings guidance multiples times in the past six months. We expect the market will, over time, come to value Siemens alongside high margin, high return-on-capital industrial peers. Our two Irish banking holdings, AIB and Bank of Ireland, performed strongly as the Irish banking market continues to consolidate. AIB is acquiring large parts of Ulster Bank’s portfolio and Bank of Ireland is acquiring the entire performing loan portfolio of KBC Bank Ireland; a fiveplayer market is thus consolidating into a three-player market. Market structure is critical in banking as it is a key input in determining banking profitability.
The consolidated Canadian, Australian and Nordic banking markets are highly profitable compared to the more challenged, fragmented German and Japanese markets. We believe market consolidation in the Irish banking market will likely strengthen the remaining banks’ market positions and profitability.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-August-2021.pdfJuly, 2021
Our positions in Spanish homebuilders performed strongly over the month as they continue to deliver on their business plans. House prices are rising mid-single digit and demand for new homes in Spain is now exceeding pre-COVID-19 demand. In addition, financing for small builders continues to be restrictive, which is resulting in continued market consolidation. While the market is beginning to appreciate the upside, the companies are currently valued on sub 8x earnings in what we believe is the early innings for what should be a long cycle in the Spanish housing market.
Chinese equities sold off sharply after several announcements from the government prompted investors to reassess the regulatory risks associated with ownership of Chinese companies. While the portfolio does not hold any positions in sectors directly impacted by the recent regulatory announcements (i.e. private education, internet services), the wider Chinese market sell off had a negative indirect impact on our Macau casino positions
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-July-2021_1.pdfJune, 2021
The market was strong over the quarter and the portfolio was up 6.1%
The June quarter capped off a solid year for the Enhanced Yield Fund. Our significant cash holdings going into the COVID-19 pandemic enabled us to take advantage of the large volume of investment opportunities that have presented themselves throughout the year. Reflective of this, I am pleased to report that the Fund returned 0.6% for the June quarter, and 3.7% for the financial year
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Quarterly-Report-30-June-2021-Managed-Funds.pdfMay, 2021
Nutrien’s stock price reacts to agriculture commodity price gains Teck Resources benefits as disconnect between steel and steelmaking coal prices begins to close
The portfolio was up 4.3% in May with the major contributors being our European banking and mineral resources positions.
Portfolio holding Nutrien, the world’s largest supplier of crop inputs and services, was up 13% over the month as management upgraded full year guidance. Corn and soybean prices are at eight-year highs which boosts demand across Nutrien’s retail footprint and supports potash demand. Late in the month the market reacted favourably to speculation that Nutrien and BHP are negotiating a partnership on Jansen, BHP’s controversial potash mega-project in Canada, which has long been an overhang for both stocks.
Diversified miner Teck Resources was another strong performer due to higher copper and metallurgical (steelmaking) coal prices. Despite steel prices being at record highs in many parts of the world, for the past six months metallurgical miners saw little benefit as China’s unofficial ban on Australian coal imports distorted pricing benchmarks. May brought the first signs of a normalization in prices. At spot commodity prices, Teck remains on a valuation well beneath ten times earnings.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-May-2021.pdfDecember, 2020
The Fund delivered a strong December with gains broadly spread throughout the portfolio. However, the gains were partly negated by a stronger Australian Dollar which has shown upward momentum on the back of higher commodity prices. Among the best performers were our commodity related holdings, with copper miner First Quantum the standout.
In our October monthly report we highlighted how First Quantum remained on a low valuation and had several catalysts for an upward re-rating, including debt reduction. The copper price has since moved beyond US$3.50 per pound, a seven year high, which allows First Quantum to reduce debt sooner than previously anticipated and de-risk the business.
Diversified miner Teck Resources is in a similar position with earnings from its copper and zinc businesses helping to offset significant capital expenditure in 2021 and 2022. There is also evidence stronger demand is creating upward pricing pressure in global coking coal markets. China’s import price benchmark (at present applicable for non-Australian imports, including Teck’s Canadian production) has appreciated sharply and decoupled from the Australian export benchmark price.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Global-Fund-Monthly-December-2020.pdfasset_class: Foreign Equity
asset_category: Long Short
peer_benchmark: Foreign Equity - Long Short Index
broad_market_index: Developed -World Index
manager_contact_details: Array
ticker: PMC0100AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://www.pmcapital.com.au/global-companies-fund/reports
MONTHLY REPORTS
fund_features:
PM Capital Global Companies aims to provide long-term capital growth and outperform the greater of the MSCI World Net Total Return Index (AUD) or RBA cash rate over rolling seven year periods. The Fund is not intended to replicate the index. The Fund is a concentrated portfolio, with its listed equity component typically holding 25 to 45 securities, when fully invested, diversified across global equity markets. Old fashioned stock pickers – fundamental, bottom-up research intensive approach. The investment process is built around the simple principle that the best way to preserve and enhance your wealth over the longer term is to “buy a good business at a good price”.
structure: Managed Fund