InvestNow News – 13th Mar 20 – Morphic Performance Report – February 2020
Ethical Investing in Focus
Regular readers will recall that one of the Fund’s investments, Alstom, was a leader in rolling out hydrogen fuelled trains in Germany. Australia is turning its attention to monetising renewable energy via producing hydrogen via the newly announced “H2 under $2” goal. Tasmania has announced a $20m renewable Hydrogen fund, along with $30m in tax concessions to build a 1000MW hydrogen plant in Bell Bay or Burnie, to utilise Tasmania’s abundant hydro and wind generation. Hopefully over time it leads to Australian jobs in export focused regional areas and continuing to export energy to the world – just not fossil fuel energy.
Portfolio review
The Morphic Global Opportunities Fund fell 2.9% in February, outperforming global markets which fell 4.6% in AUD terms. Global equities fell -8.1% in USD terms, as fears of the contagion effects from the Coronavirus drove share markets down. In one brutal week at the end of February, the market completed its fastest “correction” (defined as a 10% fall from the peak) ever. A falling Australian dollar versus the US dollar cushioned the losses somewhat.
Our position in funeral home operator, Service Corp, performed the best, presumably on the assumption of rising demand for its services. Also contributing was our position in Chinese listed Tencent, China’s leading internet and Games Company, as people still need something to do whilst on quarantine across China.
The largest single detractor of performance for the month was our holding in Swiss listed computer periphery manufacturer, Logitech. A sell-side broker downgraded the stock ahead of its capital market day on concerns that coronavirus would impact both its ability to supply product and a lowering in demand in the short term.
Outlook
We wrote last month “Despite talk that Chinese GDP may slow to well less than 5% this year and large scale manufacturing shutdowns, markets are prepared to look through this and focus on the backdrop of fiscal and monetary easing. Whether this can be sustained in coming months remains to be seen”.