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Investing highlights & lowlights

December 2021 - Fisher Funds KiwiSaver & Managed Funds

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13 January, 2022

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

All Fund returns below are after fees & before tax

New Zealand

The New Zealand portfolio rose +1.5% in December, versus the local market at +2.5% (S&P/NZX 50). Two companies that positively contributed to returns in the portfolio were:

On its return to the portfolio EBOS (+13%) announced it was buying Australian medical devices distributor Lifehealthcare and raised new equity to partly fund the transaction. This is a logical acquisition in line with the company's previously stated strategy, as Lifehealthcare is a leading player in the attractive medical device distribution market where EBOS already has a small presence.

Infratil (+3%) announced the further expansion of its diagnostic imaging business, acquiring Bay Radiology and Auckland Radiology Group. The company has now cumulatively invested around $700 million in this business as it successfully re-deploys proceeds from its sale of Tilt Renewables.


Australia

In December the Australian Growth Fund returned +2.8% net, which compares to +3.3% for the benchmark index.

After falling in November, Nanosonics (+15.6% in A$) rebounded strongly in the month although there was no material news for the company. In a December trading update, AUB Group (+12.5%) upgraded its earnings expectation given favourable trading momentum across its businesses.

In November, Domino’s Pizza’s share price fell following a trading update where it noted that sales growth in its key Japanese market had slowed. The share price continued to fall a further 9.0% in December following this announcement. Despite this fall, Domino’s returned +38.8% in 2021 which is pleasing.


International Growth Fund

The International Growth Fund rose +4.4% in December, compared with the global benchmark which gained +3.4%. This month’s outperformance was driven partly by strong performance from our healthcare holdings Icon and Edwards Lifesciences, as well as Mastercard. The two biggest drags on performance were our Chinese investments, Tencent and Alibaba, which continued to slide.

Edwards Lifesciences (+20%), the transcatheter heart valve manufacturer, held its annual investor day in December. The management presentations reiterated the large scale of the opportunity to repair and replace faulty heart valves through minimally invasive technology, rather than open-heart surgery. We continue to see years of strong growth ahead for Edwards, in a market where they are the leading player.

Icon plc (+14%), the clinical trials outsourcing provider, gained on continued strong industry trends and reports that the integration of Icon’s acquisition of PRA Health Sciences is progressing well. Demand from pharmaceutical and biotech companies for clinical trials remains strong as a result of a strong biotech funding environment, resulting in industry backlogs near record levels and confidence that strong growth will continue in 2022.


Property & Infrastructure Fund

The Property & Infrastructure (P&I) portfolio delivered a return of +5.6% in December versus its benchmark of +5.9%. Some companies that positively contributed to returns in the portfolio were:

Early childhood education centre owners Charter Hall Social Infrastructure (+11%) and Arena (+11%) both announced revaluations for their property portfolios for the last 6 months. These saw +12% and +14% uplifts in the book value of their assets respectively. This reflects continued strong demand from investors for childcare properties in Australia, which have proved resilient despite COVID restrictions.

Infratil (+3%) announced the further expansion of its diagnostic imaging business, acquiring Bay Radiology and Auckland Radiology Group. The company has now cumulatively invested around $700 million in this business as it successfully re-deploys proceeds from its sale of Tilt Renewables.


Income Fund 

Activity across global fixed income markets tends to slow down as the end of the year nears. But there were still several portfolio highlights in December.

The first was a recent investment we made in a “green” bond issued by Contact Energy Limited. The company has several growth opportunities on the go including their flagship Tauhara geothermal project which will reduce the company’s carbon footprint and underpin future cash flow generation. The funds raised through the issuance of this bond will go towards financing this project and were well received by local fixed-income investors. This resulted in the bonds appreciating in value in secondary market trading. 

Our holding in Golden Goose bonds, the Italian-based branded footwear business with sales in over 70 countries, was another portfolio highlight. The company continues to deliver a strong financial performance which reflects online sales growing at a rapid pace, particularly in the US, helping the bonds deliver an attractive return. We expect 2022 to be another strong year for the company as it executes on the next leg of its global store expansion plan.

Netflix also made for good (investment) viewing during December. The company has maintained positive operating momentum throughout 2021 and continues to produce content that is both retaining existing customers and attracting new ones. Ongoing subscriber growth creates strong cash flow generation and with the next instalment of ‘F1: Drive to Survive’ due for release in a couple of months, we expect the company to maintain pole position within the internet entertainment service sector. 

More broadly, interest rates in New Zealand have been increasing all year, causing domestic fixed-income assets to register their worst yearly return on record. The resulting higher level of income these assets will now provide moving forward should see their performance improve markedly in 2021. However, we feel it may be the turn of foreign fixed-income assets to experience the near-term pain that rising interest rates have on their value in 2022. In preparation for this, we have begun moving more of our fixed-income investments onshore.



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