1/13/2021 11:00:00 PM

Fund Reviews: Australasian Growth

Written by Doug Jopling, Senior Investment Analyst and Portfolio Manager

Australasian Growth Fund

The Australasian Growth Fund was up 3.8% during December versus its benchmark index, which was up 5.1%.

The rotation into cyclical/value continued to some extent into December, although some growth stocks that were sold off in November bounced back. The second half of the month was quiet with a lot of fund managers on holiday.

The largest contributors in the month came from the materials, pharmaceutical and retail sectors. The material sector (non-gold) performed well in December as the rotation into cyclicals continued, with Centaurus Metals, a nickel explorer, up 37% for the month and Galena Mining, a lead mine developer, up 24%. Michael Hill International climbed 31% after announcing a profit upgrade in early December.

In terms of negative contributors, Elanor Investors Group fell 14%, which I put down to profit taking as the share price had increased by ~60% over October/November.

In terms of other changes to the fund, I have carried on building two new positions and topped up on a couple of existing positions.

While it was a quiet end to the year, 2020 will go down in history as one of the most volatile in terms of stock market movements.




Written by Mike Ross, Senior Investment Analyst

Australasian Dividend Fund

December was a strong month for the Dividend Fund, up 7.1%, but it did not start well with McPherson’s announcing a material profit downgrade on 1 December. The share price declined 35%. ABM, the company’s partner in its China export business, performed poorly in the November promotional period. This led to lower forward orders for McPherson’s and the withdrawal of its recently issued profit guidance.

City Chic increased by 46% during December after the company announced the acquisition of the ecommerce and wholesale assets of Evans, a UK plus size brand. The transaction accelerates the company’s push into Europe and was struck on attractive financial terms. Post transaction, City Chic retains a healthy cash balance that could be deployed into further acquisitions and organic customer acquisition (online marketing).

My conviction in City Chic increased during 2020 as management demonstrated disciplined capital allocation, a very strong market position in Australia, and early signs of execution in large offshore markets. Management’s decision in September to abandon its pursuit of Catherines due to an aggressive counterbidder indicated strict criteria around customer acquisition and a focus on long-term value creation for shareholders. This was not the consensus view as the share price declined amidst disappointment the company was foregoing a short-term earnings accretive opportunity. I used this opportunity to add to the fund’s position.

City Chic management appear to have successfully pivoted the brand towards casuals and other categories that have been more resilient through the Covid pandemic. I believe this demonstrates the under-served nature of the plus size category in Australia, City Chic’s dominant position within it and, ultimately, the connection it has with its customers. Once trends normalise this could bode well for the company’s share of wallet.

Uniti increased by 9.6% during December after announcing the acquisition of Telstra Velocity. The fund participated in an equity raise to partially fund the transaction. As part of the transaction Uniti secured Telstra as a retail service provider on its own network. This is a significant development for the company which will build on its competitive position and improve its prospects within the developer market, particularly at the larger end.

Looking back at 2020, it is pleasing to have delivered a solid result, however there were a lot of mistakes made. I estimate the fund gave up ~10% performance raising cash at or near the bottom of the market in March. There is no question I could have better managed the market turmoil. The positive lesson is to hold on to your winners and be patient with great businesses or management teams. A significant portion of returns in 2020 came from companies and management teams we have backed for a considerable time.

The biannual distribution of 4 cents per unit (increased from 3.75 cents per unit) was processed on 31 December and should now show in your investor portal. 




Written by Chris Bainbridge, Head of Australasian Equities and Portfolio Manager

Australasian Emerging Fund

With over 30 IPOs and a range of company specific news, December was busier than the one-way bridge at Tairua over Christmas. We’re pleased to say the Emerging Fund had a solid finish, ending the month up 3.6% versus the Emerging Companies Index which was up 5.0%. This took the Emerging Fund’s 12-month performance to 33.9% versus the Emerging Companies Index which was up 30.6%.

Positive contributors to performance during the month included City Chic, Pacific Smiles and Marley Spoon. City Chic (CCX), a retailer of plus sized women clothing, re-rated following the acquisition of UK-based online retailer Evans. The acquisition provides CCX with a foothold in the lucrative UK market while leaving plenty of powder dry to fund further M&A. Pacific Smiles (PSQ) continued its upgrade cycle, upgrading both patient fees, EBITDA and new dental centre numbers. In our view, the upgraded guidance continues to look conservative, which means PSQ should continue to give investors plenty to smile about. Finally, after making a meal of its recent capital raising, Marley Spoon staged a recovery in December on the back of positive readthrough from competitor HelloFresh and the resurgence of Covid-19 in the northern hemisphere.

Detracting from performance were Damstra and Over The Wire. Over The Wire (OTW) missed market expectations for organic EBITDA in 1HFY21 due to lower one-off revenue. While disappointing, we place a low value on this type of revenue and are encouraged by OTW’s re-acceleration of recurring revenue toward its 15% target and the performance of its recent acquisitions.

While 2020 was a rewarding year, we would like to remind investors that 33.9% return isn’t normal and encourage investors to temper their return expectations moving forward. That said, we remain positive and excited about the prospects for our companies in 2021. We thank you for your support in 2020 and wish you all the best for 2021.




Written by Chris Bainbridge, Head of Australasian Equities and Portfolio Manager

Australasian Growth 2 Fund

The US Presidential Election pushed corporate action into December, resulting in a busy month of IPOs and company specific news. Growth 2 landed on the right side of these events, finishing the month up 7.0% versus the Australian Small Ordinaries Index which was up 5.1%. This took Growth 2’s 12-month performance to 43.2% versus the Australian Small Ordinaries Index at 12.2%.

The month: IPOs such as Nuix, Doctor Care Anywhere and Maas Group provided positive tailwinds for performance during the month. Detracting from performance was IEL, which declined on the back of investor concerns regarding relations with China.

The year: 2020 was rewarding, but that performance is in the past. Process is the future. Where can I improve my process in 2021? One area is selling. A recent study by Inaltyics showed that 79% of portfolios lost out on potential gains by selling shares at the wrong time. The study prompted me to review my sells. Putting aside the bull market slanted nature of the data set (when markets are rising, selling generally detracts from performance), my selling needs more work than a Botox party. Selling where I had reduced expectations was effective. Selling on valuation proved costly. Over time, a portfolio’s return will gravitate to the return of the best performing positions. Taking profits is important if you’re exposed to cyclicals which will mean revert. However, selling long-term compounders on valuation (rather than company specific news) truncates the performance of your best performing positions and thereby the portfolio. This type of selling proved a costly error in 2020 and one I will aim not to repeat in 2021.

Looking forward: outperformance in one year is generally followed by underperformance in the next. We’re conscious of that risk but motivated by the challenge and we’re excited about how the portfolio is positioned coming into 2021. We thank you for your support and look forward to delivering for you again in 2021. 


Past performance is not an indicator for future performance. This is not intended to be financial advice and does not take into account any particular person’s circumstances. Before relying on this information, please speak to an independent financial adviser. Pie Funds is the issuer of the Pie Funds Management Scheme. For access to the PDSs, please click here.

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