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Investing highlights & lowlights — July 2017

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Investing highlights & lowlights — July 2017.

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

New Zealand Growth Fund
The NZX50 delivered yet another positive month in July, adding 1.1% and taking its gain to 12.5% for the year. The New Zealand portfolio gained 2.4%, comfortably ahead of the index. Mainfreight was the top contributor, up 4.9% for the month, during which it held its AGM and confirmed a robust outlook for most of its key markets. The best performing stock in the portfolio was Michael Hill, up 13%. This was particularly pleasing to see as we added to the position following its 4th quarter sales figures release early in the month. Fisher & Paykel Healthcare was one of only four positions to decline (down 4.4%), consolidating after several consecutive months of gains.


Australian Growth Fund
An uncharacteristically dry July for investors in Australia with the benchmark ASX 200 Index flat in Australian dollars. With scant company specific news going into the busy year-end reporting season, the share market responded to macro and regulatory changes. The Australian dollar strengthened over the period, pressuring the prospects of global leaders like CSL, Sonic Healthcare and Reliance Worldwide. Portfolio holdings BHP Billiton and Rio Tinto benefited from continued strong pricing for their key commodity exports, while NAB, CBA and Westpac were strong when regulators quelled fears that the Australian banks would have to cut dividends to raise capital.


International Growth Fund
Global share markets continued to climb in July, with the MSCI World Index up 1.4% for the month. Markets were supported by a strong start to US reporting season, with S&P 500 corporate earnings on track to grow at an annual rate of 9% in the second quarter. adidas was a top performer for the portfolio in July, up 15%, as strong demand for its recent product launches and market share gains in the US resulted in them upgrading their 2017 earnings growth guidance from 13-15% to 26-28%. The portfolio also benefited from a takeover offer for our UK listed payments company, WorldPay, which resulted in the share price jumping 18% during the month. The biggest detractor from performance was aerospace composites manufacturer, Hexcel, which fell 7% after reporting weaker than expected demand for widebody aircraft components. We believe this slowdown is temporary and does not change our view of the company’s medium term growth outlook.


Property & Infrastructure Fund
The Property & Infrastructure portfolio was down slightly (-0.2%) in July. Trustpower had the biggest impact on returns, up 6.8%, on the back of another upgrade to guidance on the back of strong generation output for the year to date. Kinder Morgan gained 7.3% after the American pipeline and terminal company confirmed its dividend growth outlook and a large share repurchase programme. The biggest detractors from performance were US railroads Union Pacific (-5.5%) and Norfolk Southern (-7.5%) which, along with their peers, were sold down after their second quarter results included slightly subdued commentary around the outlook for industry volumes in the near term.


Income Fund
In what was a fairly uneventful month for global fixed income markets, bonds did what they do best generating stable income without much fanfare. Despite reducing our exposure to higher yielding corporate bonds of late, the portfolio continues to generate income approximately 0.5% higher than local term deposit rates at present.

The portfolio’s, ever declining, higher yielding investments produced mixed results this month. While their returns largely netted one another off over the month, the worst performers undeniably held the portfolio back from producing materially better returns. Our strategy remains to reduce these holdings in periods of strength. In keeping with this we exited two further corporate bond investments during the month.

 

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