The Australian Growth Fund gives you access to invest in quality, growing Australian businesses. The Australian market is deeper and broader than in New Zealand, which provides numerous opportunities to invest in great businesses. Being such a broad market with so many investment opportunities means some companies are often poorly researched and not well understood by the market. The outcome of this is that high quality companies can trade below their inherent value. Our team making investment decisions are well informed and spend their time conducting their own research on this market.
There is a lot of diversity in the products and services that companies in the Australian market offer. Because of the population size,the growth path for Australian companies can be smoother than in New Zealand. This is important as it provides these companies a broader growth opportunity domestically, before they need to consider the challenging step of exporting their business model to chase growth.
|15% Share Price Change||1.0% Contribution to Return|
|20% Share Price Change||0.9% Contribution to Return|
|-18% Share Price Change||-0.7% Contribution to Return|
|Top 10 holdings||52.7%|
Senior Portfolio Manager
Senior Investment Analyst
The Australian Growth Fund rose 5.2% over the month as global equities bounced back from the soft December quarter. Gains across our portfolio were broad based, with 19 out of 24 portfolio companies finishing the month in the green. A number of our higher growth companies rebounded strongly in January including cloud-based software company Wisetech +20.4% in A$, Nanosonics +17.6% and Carsales +14.6%.
Receivables management provider Credit Corp (+17.2%) was a standout and reported a solid set of financial results in the month. The company continues to do well in organically growing its profitability in the US purchased debt ledger market. Closer to home, in Australia, management are also successfully growing the consumer lending business without compromising their credit standards. This financial discipline was also evident in the Australian purchased debt ledger results. Credit Corp has elected not to chase business in this division at the cost of price. In the longer run we think the company and its shareholders will be rewarded for this discipline.
Healthcare device company Resmed (-17.9%) fell after reporting its Q2 financial result. Sales of Resmed devices in markets outside the US were substantially below expectations in Q2. Resmed had benefited in 2018 from some regulatory changes in France and Japan, then it became apparent that this one-off benefit was larger at the time than the market had appreciated. We do not think that this ‘miss’ is a reflection of a structural negative structural shift in the longer run outlook for sales. Resmed has stepped up its investment recently in software related to the provision of medical care to patients. The execution and pay-off of this strategy is long dated. In the near term large earnings growth from this expansion won’t be evident and this also disappointed the market. We think that the logic and investment rationale behind this software strategy is sound, and remain happy with our investment in the company.
There were no significant changes to our portfolio during the month.
In the portfolio holdings below you will find a diverse range of companies. Some of these will be brands you know well, and others may be new to you. The companies we invest in range from banks and fast food brands, to companies in the healthcare and tech sectors.
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