7/8/2021 12:00:00 AM

Fund Reviews: Global Growth

Written by Guy Thornewill, Head of Research UK & Europe and Senior Investment Analyst

Global Growth Fund 

The Global Growth Fund rose 2.9% in June, leaving it up 34.9% for the 12 months to date.

The fund made further progress during the month in a largely stable market environment. Performance was driven by several winners but, perhaps more importantly, by having no significant losers. As portfolio managers and analysts, we are passionate about finding stock-market winners for our clients, which we hope to achieve by identifying the best companies that fit our investment criteria and style. Holding such companies for the long term helps to generate good returns which compound over time. However, when we get it wrong, stocks can fall steeply and rapidly, and therefore it is equally important to try and avoid these losers. We meet hundreds of companies per year but only make a few new investments, and so having the right process is crucial, and is something we try to constantly improve on.

One such long-term holding in the fund is DiscoverIE, a UK manufacturer of customised electronics. We have owned the shares for nearly two years and know the management and the business well, and we believe it will compound returns for many more years to come. In June, the company announced its fiscal year end results and indicated excellent momentum in its target markets of renewables, transportation, medical and industrial connectivity. Orders are currently growing ahead of sales, which is a key indicator of buoyant activity. The shares have performed well, and while our position size may change over time, we still view this as a core portfolio holding.

Other holdings that contributed in June included ATS Automation Tooling Systems and Swedencare, which are part of our automation and pet themes respectively. Both companies have announced recent acquisitions that have been well received by the market. On the negative side, GB Group shares fell despite good results, and we topped up our holding as we believe this is another long-term compounder. 

Written by Toby Woods, Senior Investment Analyst

Growth UK & Europe Fund

The Growth UK & Europe Fund rose 1% in June, leaving it up 58.8% for the 12 months to date.

The fund continued to deliver a positive result this month due to strong share price performances from two of the largest positions, DiscoverIE and Sdiptech. However, there was also a drag from Avon Rubber, Westwing and Midsona. Overall, however, we are satisfied with the development which has cemented a pleasing performance in the first half of 2021.

DiscoverIE, a UK manufacturer of customised electronics, announced its fiscal year end results and indicated excellent momentum in its target markets of renewables, transportation, medical and industrial connectivity. Orders are currently growing ahead of sales, which is a key indicator of buoyant activity. Sdiptech is a Swedish technology group that delivers high quality infrastructure solutions and services that contribute to creating sustainable, efficient and safer societies. Examples include water treatment and controls, uninterrupted power supplies, building climate control systems and EV charging networks. During a series of calls with investors, the management made clear that the tailwinds to its business are set to remain for years to come, which attracted new money into the stock.

On the negative side, Avon Rubber has continued to drift downwards on no new news. We have scheduled our first in-person meeting for more than a year with the management team at their headquarters in mid-July, which will help us reassess the investment thesis. Westwing, a German home improvement e-commerce business, has rolled over from its highs due to an expected slowdown in demand as Covid restrictions are lifted, the weather improves, and the European football championships are on. We sold half our position, consolidating profits. Finally, Midsona, a Scandinavian producer of health foods, has underperformed following some rebalancing of inventory at its customers.

We added one new position during the month, Acast, which is a Swedish platform for podcast hosting that generates revenue from ‘dynamic ad insertion’ into podcast streaming. Podcasts are becoming a mainstream media source, taking advertising share from radio. This is driving sales at Acast by more than 60% per annum.

Finally, we sold our position in Belvoir, selling into the share price strength as the UK housing market may peak short-term during the final month of reduced stamp duty. 

Written by Guy Thornewill, Head of Research UK & Europe and Senior Investment Analyst

Global Growth 2 Fund 

The Global Growth 2 Fund rose 4.7% in June, and it is now up 23.9% for the 12 months to date.

Global stock markets once again had a calmer month, without the violent sector rotations seen during the first few months of 2021. In this kind of environment, and with inflation fears receding somewhat and interest rates stable, the fundamentals of individual companies tend to reassert themselves into stock prices. We also expect the second quarter reporting season, which is about to commence in earnest, to be another buoyant one. This framework should usually be positive for stock-picking funds such as Global Growth 2, and indeed we are pleased that the fund had its best month since November 2020.

Returns were driven by a combination of some household name global growth stocks, and some sharp moves up from some of our thematic holdings in the automation and electric vehicle batteries sectors. The best performer was Nike, which moved up after announcing very strong sales and profit numbers that significantly exceeded market expectations. As well as showing robust growth in the US and Europe, a slowdown in China growth was also less than the market had feared. We view Nike as a core holding at the present time. Other global growth leaders that performed well for the fund included Amazon and EssilorLuxottica.The latter is a leader in spectacle lenses and frames and recently closed a large acquisition.

Our automation holdings had a good month too, with ATS Automation Tooling Systems and Tomra moving higher on good order intake prospects. Finally, Samsung SDI, a global leader in electric vehicle batteries, moved up by almost 15%. We expect demand for electric vehicles to grow quickly for many years and expect this company to strongly benefit.

The only new addition to the fund during June was SES-imagotag, which makes electronic shelf labels. This is still a small company, but it is a leader in a fast-growing sector which we think has a good chance to be much larger in the future as retailers race to digitise their shelf space.

Information is current as at 30 June 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.