1/13/2021 11:00:00 PM

Fund Reviews: Global Growth

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Read the latest on our Global Growth funds: Global Growth, Growth UK & Europe, and Global Growth 2.

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

Global Growth Fund 

The Global Growth Fund rose 7.1% in December, leaving it up 30.9% for the 12 months to date. The cash level on 31 December was 14%, down from 20% at the end of November.

It was pleasing to see the fund end the year on a positive note, with returns achieved via a broad mixture of holdings as well as a takeover. 2020 was certainly an exceptional year for global stock markets, and we believe that our focused investment approach was key to navigating the period. This approach is centred on researching and buying high quality growth companies with strong balance sheets and superior management teams, and this process has proved to be robust. We will continue to maintain and enhance it.

Performance was boosted by a takeover bid for IMImobile from Cisco, which made a cash offer at a 48% premium. We have held IMImobile for several years, and have always thought highly of its technology, its leadership position in the growing communications software market, and its excellent management team. The market had been slow to value the stock at similar multiples to peers, but Cisco has clearly recognised this value. This event illustrates, in our view, the benefits of our patient and disciplined investment approach.

Other holdings which performed well during the month included Swedencare following another acquisition, Fonix Mobile, Boku and Voltronic. DO & Co, which was purchased during the month, also made a solid contribution rising 25%. DO & Co provides airline and event catering, and it is another example of how we have tilted the fund towards some Covid recovery plays since the vaccine news was released.

The only blip came from our holding in Avon Rubber. This company, which makes helmets, masks and body armour for military and emergency services, announced some contract delays due to some issues in testing. The stock fell sharply, but our analysis has left us convinced that the issues are temporary, and so we increased our position on the weakness.

As we look out to 2021, equity markets feel buoyant despite the worsening number of Covid cases in Europe and the US. We think the biggest risk to markets right now is bad news relating to vaccines, either due to safety or efficacy issues or a slow roll out. In the medium term we will also keep a close eye on the level of interest rates and inflation, but for now a strong expected earnings recovery for many sectors in 2021 as well as continued loose monetary and fiscal policy should be supportive of markets.




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

Growth UK & Europe Fund

The Growth UK & Europe Fund was up 12.4% in December, its best month in the last two years, leaving it up 31.8% for the 12 months to date. The cash level on 31 December was 20%, down from 24% at the end of November.

The fund had a very good end to the year, significantly outperforming its S&P European Small Cap benchmark. This was driven by a wide range of stocks, but the most noteworthy was IMImobile, which received a cash bid from Cisco at a 48% premium. We have held the stock for several years, and have always thought highly of its technology, its leadership position in the growing communications software market, and its excellent management team. The shares had lagged peers in recent months, but this event illustrates, in our view, the benefits of our patient and disciplined investment approach. The shares have increased about 200% since our initial purchase and it has always been above a 5% weighting in the fund.

Other holdings which performed well during the month included Swedencare following another acquisition, SES-imagotag which announced continued strong order inflows, Fonix Mobile and Boku. DO & Co, which was purchased during the previous month, also made a solid contribution rising 25% as investors continued to look for Covid recovery plays. The major negative in the month came from Avon Rubber, which fell sharply after announcing some contract delays, which we believe are only temporary.

Fund activity was quite limited. We exited Belgium cinema operator Kinepolis, recently bought for the recovery trade, as studios are increasingly releasing films via streaming which is accelerating the structural threat to cinemas. We also sold Talenom as the stock had more than doubled since purchase earlier in the year, and the valuation had become very stretched. The only stock we added was Biesse, an Italian tool manufacturer, as we expect the shares to recover as industrial capex starts to pick up.

Looking into 2021, market gains could well continue despite the worsening Covid situation in Europe. With a vaccine being rolled out, investors are looking through the near-term health situation and increasing travel restrictions. Therefore, the greatest risk to markets right now is negative news on the vaccine.Finally, we did at last get a Brexit trade deal announced between the UK and the EU right at the end of 2020. While not perfect by any means, it does remove a layer of uncertainty, and we reduced our sterling hedge in the fund from 80% to 50% following this news.  




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

Global Growth 2 Fund 

The Global Growth 2 Fund was up 2.9% in December, leaving it up 15.2% for the 12 months to date. The cash level on 31 December was 11% up from 10% at the end of November.

The fund made steady gains during the month, but large cap growth stocks continued to underperform the overall market as cyclicals and beaten up Covid recovery plays such as travel, leisure and energy stocks remained in favour. We tilted the portfolio towards some recovery stocks in the airport, car rental and hotel businesses, but we will not stray too far from our fundamental belief that high quality growth companies at attractive valuations will provide better returns for clients in the medium and long term. With interest rates and inflation remaining low, a situation we expect to continue in 2021, the backdrop remains favourable for growth stocks, even if the earnings recovery from Covid will likely be greater in other areas of the market. We have also taken care to either take profits in or to avoid altogether some areas of the technology sector where valuations have become extreme, with some companies trading on multiples of over 100x revenue.

The best performers during the month included BHG Group, a Scandinavian e-commerce retailer in the DIY and home furnishings segment, and Disney, which was recently purchased. Disney should see an additional earnings boost when its theme parks reopen, but in the meantime its new streaming business Disney+ is attracting millions of new subscribers, which is increasing the long-term value of the franchise. On the negative side, Alibaba shares fell after the Chinese government took the view that it was becoming too powerful, having previously forced a last-minute cancellation in the proposed public offering of Ant Financial, in which Alibaba owns a 33% stake. The shares look too cheap now, but we will monitor the next steps in this process carefully.

In terms of fund activity, we exited the holding of Nice Information Service in Korea which had performed well, and added Soitec, a French semiconductor company making wafers that are mainly used in mobile handsets. Soitec will benefit as more 5G phones are purchased as its content per phone increases compared to 4G handsets, and the early signs are promising. We are also looking to further increase the fund’s exposure to non-US listed companies, where we feel that in many cases valuations are now more attractive than in the US.


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.