International Growth Fund: 2015 in review

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International Growth Fund: 2015 in review.

Nike and Adidas were strong performers for the portfolio in 2015. Both companies are benefitting from a trend to "athleisure" or the increasing use of sports apparel and footwear for casual use. With Nike you get absolute best in class. The selling power of its iconic brand combined with its innovative culture will drive strong growth in earnings for some time. Adidas is similarly a high quality company with a well recognised brand. It is the equal of Nike in most markets outside of the US and is especially strong in football playing emerging markets. We had monitored Adidas for a while and were fortunate to buy at an attractive price when factors outside the company's control caused short-term uncertainty.

Sometimes luck plays a role in investing, good and bad. In the case of Gameloft, we were unlucky. Gameloft are a leading video game developer for mobile phones. They are an innovator in this fast moving and rapidly changing industry. The quality of their games is strong but monetisation has been an issue. After meeting management we became concerned that their model was changing from charging for mobile games to one where games were free and revenues would come mainly from advertising. We felt it prudent to exit Gameloft and reassess from the sidelines. Unfortunately we were blindsided by a decision by Vivendi to buy a significant stake in Gameloft which resulted in a strong share price performance, much of which we missed out on.


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