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 Growth Fund

The New Zealand Growth was up 2.2% for the month. Portfolio company a2 Milk was a standout (+13.5%), on the back of several supportive proof points and various investment firms touting the company’s potential to succeed in 2019. Both sales data for some of the key Chinese e-commerce platforms and Australian supermarket data had a strong finish to 2018, plus New Zealand export data also indicated strong volume growth. These data points reconciled with our positive view from late 2018, when we saw regulatory concerns subside and in-market pricing improving, which when combined with our overall positive view of the company gave us confidence to increase our holding at lower prices.

Michael Hill (-7.7%) reported its key December quarter sales, which were disappointing in absolute terms, reflective of broader retail market conditions, although showing a marked improvement since new CEO Daniel Bracken has started. The company has backed away from its unsuccessful shift to cutting promotional activity, which saw same store sales fall -11% in the previous quarter. Same store sales rebounded to +1.3% in November/December. Daniel’s initial focus is on retail operating fundamentals and we are of the view his influence will have a positive impact here.

We reduced our position in Auckland Airport during the month.  The stock has performed strongly recently and given this, together with the signs airlines are reducing capacity we reduced the holding.