Written by Toby Woods, Senior Investment Analyst
Global Growth Fund
The Global Growth Fund rose 3.9% in March, leaving it up 42.1% for the last 12 months. The cash level on 31 March was 14%, down from 21% in February.
The fund delivered solid performance throughout the month, despite the ongoing market rotation that does not favour our growth-over-value style. Performance was helped by a strong move in Taiwanese bike producer Giant Manufacturing. The demand for bikes is one of our core themes currently, with the pandemic having boosted global sales whilst a structural shift towards e-bikes gives additional tailwinds. Other notable performers were Boku, a long-term holding for the fund, and Traxion, a Mexican logistics business in which we recently increased the position size.
We bought three new positions in the month. The first was SP Plus, the largest provider of parking management, shuttle transportation, valet, and other services to commercial, hospitality, municipal, institutional, and large venue customers in the US. It should be a classic reopening play as travel activity, whether local, national or international, starts to get back towards 2019 levels. SP Plus has been proactive in the crisis by taking locations off struggling peers, which results in a much higher market share once normality is reached. However, the shares still trade 25% below its pre-pandemic level. The second was EKF Diagnostics, a UK healthcare testing business that is a contract manufacturer for Covid-19 tests globally. The company continues to see upgrades to its estimates as testing requirements remain high. The third was Encavis, a best-in-class European operator of solar and onshore wind farms.
We exited our position in Norma, a stock we originally purchased in May last year as one of our first recovery plays. The shares have done well, up about 70% in that time, but given some supply issues across the entire automotive space we are concerned about impending production disruptions.
Finally, we added to our positions in Biesse and Pets At Home, the latter being geared towards another of our favourite themes, and we reduced exposure to Fashionette, OMA and Fonix.
Written by Toby Woods, Senior Investment Analyst
Growth UK & Europe Fund
The Growth UK & Europe Fund rose 4.4% in March, leaving it up 61.9% for the last 12 months. The cash level on 31 March was 22%, down from 28% at the end of February.
The fund enjoyed a robust performance during the month, predominantly driven by holdings in Accell Group, Boku, Fonix and Westwing. Accell is a Dutch bicycle manufacturer and is a pure play on the growing demand for bikes and e-bikes, which remains a favourite theme of ours. The company released a strong earnings update which propelled the shares 30% higher. We believe this theme still has far to run, although we are aware of supply chain shortages which will have been made worse with the blockage of the Suez Canal, so we have prudently trimmed our position in recent days. Boku is a long-term holding in the fund and reached new all-time highs after publishing its 2020 results and maintaining a positive outlook. Fonix, a leading UK based provider of mobile payments and messaging services, continued its outperformance with the shares having nearly doubled since we bought at IPO in October. Valuation is harder to justify now so we are taking some profits. Lastly, Westwing saw a rebound after announcing 2021 guidance which exceeded analyst expectations.
We added three new positions during the month: CSAM, Midsona and NFON. We met both CSAM and Midsona for the first time and were impressed by these Scandinavian roll-up stories. CSAM is an e-health software provider with an entrenched position in a market with secular growth, giving it high revenue visibility and healthy margins. Midsona is a supplier of health foods, which historically have been sold through specialist retailers, but which are now becoming more prominent on supermarket shelves driving volume growth. Both these companies benefit from a fragmented marketplace, and they are successfully building on their respective platforms through acquisitions. NFON is a German-listed tech company offering cloud telephony (a phone system that runs through your internet connection) solutions to small businesses across Europe. We participated in a capital raise as the company is preparing to gear up for further growth, having already doubled its subscriber numbers since listing in 2018. We believe cloud telephony is a key component of more flexible working practices.
In other activity, we added to Bytes Technology, Encavis and Biesse while we reduced exposure to Fashionette. Finally, we exited our position in Norma as supply chain issues in the automotive industry pose some challenging times ahead, and the shares were up about 70% since purchase.
Written by Guy Thornewill, Head of Research UK & Europe and Senior Investment Analyst
Global Growth 2 Fund
The Global Growth 2 Fund rose 1.8% in March, leaving it up 27.8% for the last 12 months. The cash level at the end of March was 6%, down from 11% at the end of February.
Higher interest rates and profit taking continued to weigh on the valuations of large global growth companies during March. This was especially true for technology stocks, with the NASDAQ Composite flat for the month, compared to a rise of 4% for the main S&P 500 index. Towards the end of the month the sharp outperformance of more cyclical and smaller cap stocks began to ease, and our belief is that a return to a stock-picking market with less extreme sector rotation is not too far away. In the short term, this depends on Covid-19 and vaccination rates, where the news remains decidedly mixed.
Fund activity was higher than normal during the month, as we are trying to construct an all-weather portfolio which can perform well even through potential bumps in the road ahead. For example, we bought a position in DR Horton, the largest US homebuilder. The US housing market is currently strong with good affordability despite recent interest rate rises. Millennials are now reaching home ownership age and population movement is accelerating due to the working from home trend. Another addition was Shimano, the largest manufacturer of bicycle gears as global bike demand remains very strong. Indeed, our holding in Giant Manufacturing was a big contributor in the month, rising 20% after posting good sales growth and a positive outlook. We also added Tractor Supply in the US, a rural lifestyle retailer, and SP Plus, which operates US parking facilities and is a recovery play. To fund these new purchases we exited some smaller positions, including JPMorgan, BHG Group, Naspers and OMA.
Thematic investing is an important element of our research process, and the fund has good exposure to several different themes. Examples of current thematic investments would be our holdings in automation (ATS Automation Tooling, Keyence, Schneider), bicycles (Giant, Shimano), 5G (Cellnex, Equinix, Qualcomm), payments (Fiserv, PayPal, Mastercard, Visa) and pets (Pets at Home). Most of these themes have structural tailwinds as well as healthy short-term demand dynamics. In terms of future themes, we are researching the electric vehicle and battery sectors, as the transformation to a more electric future for many industries accelerates.
Information is current as at 31 March 2021. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary.