Investing highlights & lowlights — November 2017
By Fisher Funds
11 December, 2017
A snapshot of the key factors driving the performance of markets and your funds last month
New Zealand Growth Fund
The New Zealand growth fund was up significantly at 3.2% outperforming the benchmark NZX which was up 0.6%. The biggest contributors to performance were Michael Hill International Ltd and Summerset Group holdings Limited at 11.8% and 8.4% respectively.
Xero was down 7.0% after a knee jerk sell off following the announcement they would transfer to a sole listing on the ASX. We used this weakness as an opportunity to add to our position.
Australian Growth Fund
November was another good month for the Australian portfolio. It delivered a return of 2.1%, outperforming its ASX200 benchmark. The portfolio benefited from its underweight position in the major banks. Both National Australia Bank and Westpac delivered slightly disappointing earnings results early in the month and the whole sector suffered late in the month in the build-up to the Federal Government confirming it would establish a Royal Commission into the Australian Financial Services Sector. The standout contributors to the portfolio in November were ARB Corporation and NextDC. Management commentary at both companies’ AGMs confirmed a good start to their 2018 years. The biggest detractor was Nanosonics. The company’s evolving business model means earnings growth will pause this year. However, the long term fundamentals remain strong in our view.
International Growth Fund
Global share markets had a healthy November. The International Growth Fund returned 1.3% slightly behind the global benchmark at 1.7%. Year-to-date performance has been a stand out 26.7%. Top performers this month were Zoetis and Edwards Lifesciences gaining 13% and 15% respectively. The biggest drag on performance was Cognizant (-4%) who growing in line with our expectations in the third quarter had weaker gross margins than some investors anticipated. The long term outlook is still positive on our view.
A change to the portfolio was exiting Brembo, a premium auto braking supplier. While it has been a great performer, we believe the profit margin and market share gains they have made over recent years are becoming more difficult to sustain. On top of this we believe the auto cycle is a lot closer to the end than the beginning and despite the potential cyclicality of the business the company is still priced on peak valuation multiples.
Property & Infrastructure Fund
The Property and Infrastructure fund had a strong month returning 3.2% and outperforming the benchmark of 1.5%. The overall performance was driven by Union Pacific Corporation and Arena REIT. Union Pacific rallied on the back of US Tax changes and Arena REIT was up following an update to their dividend guidance that was up 6.7%.
Contact Energy Limited sold off after being removed from the MSCI index during the month.
The Fixed Income Fund had a tough November as yields remain low globally. We remain underweight in Credit markets due to rich valuations and cycle risks, so hold only a small number of these positions. This month underperformance was driven by three such positions, Altice investments Frontier Communications and Bopran. These companies are high yield investments and we are more optimistic about their future ability to meet their financial obligation than the market.