Investing highlights and lowlights - FFKS & Managed Funds 2022 | Fisher Funds Scroll

Answers to Common KiwiSaver and Investing Questions - 1pm Thursday 11 August  2022

Join our next webinar. As part of Money Week 2022, our panel of experts will be answering some of our most commonly asked KiwiSaver and investing questions. 

Register here >

Investing highlights & lowlights

July 2022 - Fisher Funds KiwiSaver & Managed Funds

Investing newsroom
Fisher Funds ,

Fisher Funds
Email Fisher Funds »

04 August, 2022

Share on Facebook Share on LinkedIn Share by Email

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 +9.1% in July, versus the local market of +5.8% (S&P/NZX 50). Two companies that had notable share price moves were:

Infratil (+9%) announced the sale of Vodafone's mobile towers business for $1.7 billion, equivalent to 34x EBITDA. The deal returns 80% of Infratil’s initial investment in Vodafone, whilst the mobile towers business represents only 10% of Vodafone’s EBITDA. Said another way, the lift in Vodafone value relative to what Infratil paid for the stake in 2019 is north of 100%. The deal continues Infratil’s strong track record of capital allocation and is another large value realisation following the sale of Tilt Renewables last year. 

Mainfreight (+10%) provided a 16-week update at is Annual Shareholders Meeting, which revealed continued strong progress in the business. Weekly profit before tax for the company grew +83% on the same period last year, a slight moderation from the +92% in the second half of the financial year to March. The Transport division is growing faster than we anticipated, Air & Ocean profits remain elevated (and above expectations), whilst Warehousing is also still growing at strong rates. The company is continuing to execute well in all areas against its long-term growth strategy, opening new branches, winning market share from new customer gains, and benefiting from efficiencies as it continues to gain scale.


Australia

In a pleasing result, the Australian Growth Fund rebounded +13.4% in July, strongly outpacing the +6.0% increase in the benchmark index. The stabilisation in interest rates, and central bank commentary that was less hawkish than expected was enough to relieve some market concerns and sparked the market rebound.  The move in interest rates (the Australian 10yr government bond rate fell from 3.66% to 3.06% in the month) contributed strongly to the outperformance of growth companies in the month, also helping our portfolio.

Nanosonics (+40.2% in A$) rose strongly in the month, helped by the macro conditions discussed above. It also confirmed in late July that the transition of its distribution arrangement away from a 3rd party distributor in the US to its own sales team is largely complete and on track. In the announcement it also guided to higher revenue for the FY22 year than the market had anticipated.

oOH!Media (+3.3%) lagged the portfolio return as the market worried about the impact a potentially slowing domestic economy would have on advertising expenditure by companies. This near-term cyclical headwind does not in our view detract from oOH!Media’s longer term earnings potential as the largest outdoor advertising company in Australia.


International Growth Fund

The International Growth Fund ended the month up +8.3%, ahead of the benchmark which was up +6.4%.

Global streaming provider Netflix (+29%) rallied after reporting Q2 where it lost fewer subscribers than expected and guided to a return to subscriber growth in Q3. The company is working on an ad-supported tier and paid account sharing to improve viewer monetisation, as well as right-sizing operations and content spend which should contribute to robust free cash flow growth going forward.

Amazon (+27%) had a very strong month, cumulating in a robust earnings update at the end of the month. Better than expected results in e-commerce, cloud computing, and advertising coupled with sequential operating cost improvement drove strong performance.

Paypal (+24%) rose on news that famed activist investor Elliott Management had taken a stake in the company. Activist investors tend to be drawn to companies with good business models and strong financial positions to deploy capital to increase shareholder value, both of which we believe to be true for PayPal. 

Detractors from our portfolio outperformance for the month were Chinese tech companies Alibaba (-21%) and Tencent (-13%). These declined along with the wider Chinese market primarily due to the threat of renewed and sustained COVID restrictions following earlier optimism that they may be winding down.


Property & Infrastructure Fund

The Property & Infrastructure portfolio rose +6.8% in July, outperforming its benchmark of +5.5%. Companies that meaningfully influenced portfolio returns were:

Infratil (+9%) announced the sale of Vodafone's mobile towers business for $1.7 billion, equivalent to 34x EBITDA. The deal returns 80% of Infratil’s initial investment in Vodafone, whilst the mobile towers business represents only 10% of Vodafone’s EBITDA. Said another way, the lift in Vodafone value relative to what Infratil paid for the stake in 2019 is north of 100%. The deal continues Infratil’s strong track record of capital allocation and is another large value realisation following the sale of Tilt Renewables last year.

Port of Tauranga (+12%) increased cargo pricing and introduced a container levy, providing protection against rising costs and highlighting the pricing power held by New Zealand ports. However, a court decision on proposed capacity expansion has been delayed until 2023. The proposed 385 metre wharf extension is being opposed by local iwi in the Environment Court. Port of Tauranga said New Zealand was looking at "severe" capacity constraints on exports within a few years if the extension is not built. Management expects to be able to meet demand over the next few years, but the delay in expansion will put extra pressure on resources at the port.


Income Fund 

After a difficult first half of 2022, global fixed interest markets bounced back strongly in July.

Cost of living pressures remained in the headlines. But there are now clear signs that global inflation rates are at or near a peak with a range of important leading indicators easing over the past few months. As a result, investors have begun to rightly question the need for dramatically higher official cash rates in the year ahead. This led to a decline in government bond yields i.e., lower expected policy rates tomorrow are priced into markets today. 

In addition, corporate earnings reported during July suggest company fundamentals remain steady at the aggregate level. This improved investor sentiment caused global credit spreads (which reflect the extra yield on corporate bonds relative to government bonds) to fall during July – pushing corporate bond prices higher.

Netflix was a key portfolio highlight this month. The company reported Q2 2022 results that were in line with prior guidance and affirmed the company’s resilient business model in addition to its global reach within the online streaming sector. The executive team also reiterated an expectation for positive ‘free cash flow’ during the current fiscal year. The update was well received by credit investors and triggered strong demand for the company’s bonds.

Our investment in Altice France – a leading European telecommunication group based in France – was also a portfolio highlight during July. In part, this reflected a rebound from June’s market weakness but recent quarterly reporting from the European telecom sector has confirmed customer demand remains stable. In our opinion, telecommunication services are essentially a ‘needs’-based product in the modern world and we think the company remains well placed to benefit from resilient demand. 

Our UBS Group AG investment (which we increased during June) also provided a boost to performance. The bank is well capitalised, and we remain confident the group can continue to entrench its leading market positions while also taking advantage of new growth opportunities across its global network.

Given the strong rally across fixed income markets, there weren’t any notable lowlights in July. 



Is there anything we
can help you with?

Chat to us