Investing highlights & lowlights — September 2017

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Investing highlights & lowlights — September 2017.

A snapshot of the key factors driving the performance of markets and your funds last month

New Zealand Growth Fund
The New Zealand share market delivered another strong month in September, making it nine months in a row of positive performance, adding 1.8% and taking its gain to 15.0% for the year. The New Zealand portfolio returned 1.5%. Once again Fisher & Paykel Healthcare led the way with strong support from Vista Group International, whose share price was up 9.2% for the month. The stock was sold down heavily into the end of August as it fell out of the NZX50 index and we took advantage of the weakened share price to add to our position. Michael Hill was the biggest drag on performance for the month, (down 7.1%), after the company fell out of the ASX300 (Michael Hill is also listed on the Australian share market). Similar to Vista we took advantage of the reduced share price to add to our position.

Australian Growth Fund
The Australian portfolio was essentially flat for the month but ahead of the market which was down 0.6%. The Fund’s out performance was broad across most major sectors of the Australian sharemarket. Wisetech Global was particularly strong as investors digested the long term growth potential of the business. The portfolio benefited from not owning low growth telecommunication heavyweight Telstra which was weak after it cut its dividend. Long-time holding Tox Free Solutions was strong as management outlined a medium term growth plan for the stronger and more diversified group. Ramsay Healthcare remained weak as investors struggled to find a front on which the business was not facing a threat to earnings.

International Growth Fund
September saw another positive month for global share markets with the International Growth Fund up 0.9% for the month. Abbott Laboratories (+4.8%) had a month of positive news flow — with two key medical devices approved by the FDA and the proposed acquisition of diagnostics company Alere getting the go-ahead from US antitrust authorities. Core Labs (+11.9%) was our top performer for the month following a strengthening oil price. Sarine Technologies (-16.1%) drifted lower on a weak diamond market and a competing inclusion mapping service in its core Indian market resulting in a loss of market share. Sarine believe this offering has infringed on its patented software and has filed a lawsuit in India seeking an injunction and damages.

Property & Infrastructure Fund
The Property & Infrastructure portfolio fell 1% in September after a strong few months. Our two US rail companies, Union Pacific Corporation and Norfolk Southern were our top contributors, up (10.13% and 9.72%). We added to Union Pacific in early September on a sector wide sell-off so it was pleasing to see our biggest position bounce back later in the month. The biggest detractor from performance was Flughafen Zurich (-6.81%). We had reduced our position earlier in the month due to slightly stretched valuations so it was not surprising to see it take a breather after a stellar 12 months.

Income FundThe recent strong reporting season validated a number of decisions our team has made to buy, hold, and sell certain investments. An example is our profitable early exit of Kelvion Heat Exchangers. Following a strong 2016 they met harder times in 2017 and were recently put on negative outlook by credit rating agency Moody’s. While we are more defensively positioned (predominantly in government bonds) at present our analysts continue to find attractive risk/reward in specific corporate bond investments.

Global fixed income markets took a breather this month, following a period of strong returns since the start of the year. Both the broader market and our portfolio registered small negative returns in September. We saw a shift back to growth assets and away from safe havens in response to renewed optimism of tax reform in the U.S. and geopolitical tension fatigue.


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