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Investing highlights & lowlights

July 2019 - Fisher Funds KiwiSaver & Managed Funds

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06 August, 2019

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A snapshot of the key factors driving the performance of markets and your funds in July 2019

All Fund returns below are after fees & before tax


New Zealand Growth Fund

The NZ Growth Fund posted returns of 5.2% in July, compared with the local share market which returned +3.4% (S&P/NZX50G). The New Zealand market continued its 2019 ‘clean sheet’ – to put it simply, every month has been positive for the calendar year. New Zealand continues to perform well compared to global markets, supported by low interest rates.

a2 Milk shares returned a stellar +22.8% in the month. We attended Synlait’s investor day, which showcased that a2 has a best-in-class manufacturing partner. The Dunsandel plant where most of a2’s infant formula is manufactured is very impressive in terms of its cleanliness, newness, and levels of automation. It was great to see the infant formula canning line rapidly firing through tin after tin of a2’s Stage 3 product. Synlait commented that unplanned stoppages are now more infrequent which we think significantly increases that actual capacity of the plant above nameplate capacity. This should support a2’s strong volume growth and also creates cost benefits for a2.

Auckland Airport dipped -5.5% during the month, giving back some of the strong recent gains. New Zealand will introduce a $35 International Visitor Conservation and Tourism Levy (IVL) later in 2019 on all international visitor arrivals excluding Australia and the Pacific. At the margin we think this may dampen tourism flows.

 


Australian Growth Fund

The Australian Growth Fund started the second half of the year on a positive footing, with the portfolio returning 3.5% across the month, ahead of the ASX200 Index which returned +2.9% (in A$). 

With most portfolio positions contributing positively to performance, Resmed (+10.7%) was one of the standout performers.  Resmed reported strong quarterly financial results in July, with signs that both its masks and devices divisions continue to grow their market share.  Its burgeoning software division, assisted by recent acquisitions also pleasingly grew strongly in the quarter.

Rio Tinto (-4.7%) dragged on portfolio performance as concerns over the lack of progress in discussions on trade between the US and China weighed on the global mining sector late in the month.

 

International Growth Fund

Global equity markets continued to grind higher in July and the US S&P 500 Index gained 1.3% for the month. The start of US reporting season and some great results from a handful of our portfolio companies resulted in strong performance for the International Growth Fund, which gained 3.7% for the month.


Alphabet, Google’s parent company, was one of the top performers in the portfolio after announcing financial results showing its digital advertising business continues to grow rapidly. The company delivered 22% revenue growth, which was faster than the market had expected and driven by rapid growth in mobile advertising and YouTube. The results saw Alphabet’s share price jump over 13% during the month.
UPS, the parcel delivery giant, also delivered stronger than expected results and saw its share price gain 16% in July. UPS is benefiting from strong growth in demand for ‘next day air’ delivery, driven by growing ecommerce volumes. Faster delivery times allow UPS to charge premium prices and this pick-up in growth allowed UPS to confirm it is on track to grow profits by 10%+ for the full year.

 


Property & Infrastructure Fund

For the month the Property & Infrastructure Fund gained 1.2%, compared to its benchmark of +0.7%.

Union Pacific gained +6.4% during the month, the most in the portfolio. The railroad demonstrated strong progress in its Precision Scheduled Railroading (PSR) efficiency initiatives during the June quarter. Its 'Unified Plan 2020' performance benchmarks are universally showing strong improvement, resulting in more rail network fluidity, improved asset utilisation, and higher productivity. These outcomes mean that Union Pacific is saving money from having more locomotives in storage and a smaller workforce. Cost savings are running ahead of the goal for at least $500 million in 2019. Overall, the result provides confidence Union Pacific is on track with PSR.

Auckland Airport dipped -5.5% during the month, giving back some of the strong recent gains. New Zealand will introduce a $35 International Visitor Conservation and Tourism Levy (IVL) later in 2019 on all international visitor arrivals excluding Australia and the Pacific. At the margin we think this may dampen tourism flows.

 


Income Fund 

The portfolio had another strong month in July.  Slowing economic activity around the world continues to drive up demand for safe-haven assets – many of which our portfolio holds.  Despite interest rates across much of the world hitting new all-time lows this month, we suspect they have not yet reached the ultimate bottom for this economic cycle. 

Slowing economic activity is now hurting company profits across a range of industries. Our long-held cautious outlook has helped as avoid many of these areas. However, this downturn is becoming more pronounced - making it difficult to find companies to lend to that are not being impacted.

 

 

 

 



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