Article written by Fisher Funds – 6th May 2021

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 Fund was up 3% for the month. F&P Healthcare (+12%) gained strongly off the back of the tragic increase in the spread of COVID that has caused global daily cases to reach new highs. April marked the beginning of F&P’s new financial year, so there is now a greater prospect of COVID globally providing an unexpected boost in this new year. We continue to receive feedback that F&P’s nasal high flow therapies are likely to be more widely adopted after performing effectively during COVID, which is our main thesis for our position.

 Auckland Airport (-1%) opened quarantine-free travel with Australia during April. Traffic has been modest so far with passengers largely returning residents and those visiting friends and family. The easing of border restrictions with Australia will act as a test case for wider border openings with low-risk countries such as the Pacific Islands and certain Asian nations.

Australian Growth Fund

The Australian Growth Fund returned +3.6% in April.  This compares to a +3.15% return for the ASX 200 Index (70% hedged into NZ$).

 Audinate, the developer of leading audio networking technology rebounded +15.1% as it released a positive trading update in the month.  Audinate is experiencing a strong uplift in demand for its products from sound equipment customers as their supply chains begin improving after a COVID-impacted year.

Credit Corp’s share price fell -11.2% in the month despite re-confirming its profit guidance of 7-13% earnings growth for 2021.  The volumes of debt ledgers being sold by Australian and US lenders seems to be lower than the market was expecting.  This may act as a near term headwind for Credit Corp’s profit growth in 2022.  We expect Credit Corp’s key divisions to return to normal, pre-COVID levels over the next couple of years.

International Growth Fund

The International Growth Fund ended the month up 5.3% versus the benchmark up 2.7%.

Global equity markets had another strong month. Ten of our portfolio companies reported in April, and results were generally strong.  Alphabet(+14.1%) and Facebook (+10.4%) both reported phenomenal earnings results in April, driving their stock prices meaningfully higher. As these are two of our largest holdings, they were two of the top three drivers of our performance in the month.

Property & Infrastructure Fund

The Property and Infrastructure fund was up 2.8% for the month. US mobile phone tower providers American Tower (+7%) and Crown Castle (+10%) reported quarterly results, with an acceleration in services revenues, ahead of expectations. This is an early indicator of the growth coming as networks are built out to enable faster next generation “5G” mobile services.

Napier Port (+5%) increased profit guidance for the current financial year, reflecting better than expected primary sector market conditions, including log volumes in particular. This is helping make up for no cruise ship berthing fees.

Auckland Airport (-1%) opened quarantine-free travel with Australia during April. Traffic has been modest so far with passengers largely returning residents and those visiting friends and family. The easing of border restrictions with Australia will act as a test case for wider border openings with low-risk countries such as the Pacific Islands and certain Asian nations.

Income Fund 

The fund’s investment in Summerset Group was a portfolio highlight this month. The company recently updated investors on Q1’21 sales, with the business maintaining solid momentum in new unit sales and resales (record levels for any first quarter period). We believe Summerset’s prospects remain favourable given the strong tailwinds of New Zealand’s ageing population and management’s focus on delivering high quality care standards.

TR Group was another portfolio highlight. The business adapted effectively to the disruptions caused by COVID-19 during 2020 and the company is well placed to offer innovative leasing solutions to operators of commercial vehicle fleets. Managing Director, Andrew Carpenter will be in our office this month to provide thoughts on leadership and developing team culture, which we are all looking forward to.

One investment that hasn’t lived up to expectations of late is our holding in Insurance Australia Group bonds. The group remains a leading player in the Australian general insurance market with a strong balance sheet. However, they have recently fallen short of our expectations regarding their disclosure and involvement in underwriting business outside what we believe their core competencies to be. As such, we have taken the decision to reduce our investment in the company. We continue to monitor the investment very closely and remain in regular dialogue with management.