October was a strong month for global markets. Offsetting the weakness last month, stock markets, especially the US S&P500, which was up nearly 7% and global MSCI ACWI index up 5.6%, performed very strongly as companies reported robust results. These came especially from some of the largest companies in the world like Microsoft, which was up 17% and reclaimed the largest company in the world tag from Apple.

Tesla also made its way up the list into the top 5 most valuable companies in the world, with an impressive 43% increase in share price this month, to overtake Facebook. The NZD was also strong, up 4.7% during the month, offsetting a lot of the strength of global markets.

The NZ and Australian markets were more subdued, with the NZ market falling slightly down 1.4% and the Australian All Ordinaries essentially flat.

There were several updates from companies. Disappointingly, EML Payments, our largest position, received further correspondence from the Central Bank of Ireland (CBI) proposing that certain limits apply to programs that would put a handbrake on their growth. We have not changed our position in the stock and believe EML will placate the CBI by introducing more controls and employing further Irish local staff and directors to provide oversight. Overall the core fundamentals of the business appear intact, despite the sentiment being extremely negative currently.

On the positive front, there has been a flurry of takeover activity. Over The Wire, a telecommunication company, received a takeover bid from another portfolio company Aussie Broadband Limited which looks to be a very synergistic acquisition. This week another position Praemium, a wealth platform, received a takeover bid from fellow listed wealth platform company Netwealth.

Quarterly results season was underway globally during October. Overall, it has been a strong reporting season, with companies seeing healthy demand and behaviour returning to normal, benefiting companies like Sixt a car rental company. The main issue is inflation in logistics and wages, providing supply constraints trying to meet the demand. This is a favourable problem rather than not having the demand, so investors are willing to look past the near-term supply constraints.

Markets continued to be driven by substantial liquidity and retail interest in particular thematics like crypto and areas like electric vehicles. Rivian, an EV company, has filed to go public with a valuation of $60B USD with zero revenue in the first 6 months of 2021. The entire market capitalisation of Honda, listed in Tokyo, is $51B USD and it produces $134B of revenue.

Overall we are avoiding these sectors with excessive optimism built into them and looking for predictable businesses that are earning strong cash returns and have widening competitive advantages.

Information is current as at 31 October 2021. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary.