SUMMARY
Summary
- The Fund returned +3.38% in June, outperforming the benchmark which rose +2.61%, supported by strong stock selection in communication services and industrials.
- Spotify, Netflix, and Taiwan Semiconductor were top contributors, while Visa, Equinix, and Cintas detracted following mixed investor reactions to guidance updates and sector rotation.
- The Fund added to Nvidia, Microsoft, and HEICO, initiated new positions in Broadcom and Fujikura, and exited Gartner, Primo Brands, and TE Connectivity. Chipotle received an ESG rating upgrade.
COMMENTARY
Commentary
Market Review
Global equities advanced in June, supported by moderating inflation, resilient consumer activity in the US, and improving growth signals in Europe and China. Growth stocks extended their outperformance over value, reflecting renewed optimism around earnings momentum and secular tailwinds such as AI infrastructure investment. A weaker US dollar detracted from performance in Australian dollar terms.
In the US, inflation remained contained, with the core PCE Index holding steady at 2.7% year-on-year. Consumer spending showed resilience, although some activity may have been pulled forward by tariff-related pre-buying. In Europe, services continued to outpace manufacturing, and composite PMIs edged higher, while inflation readings fell toward or below central bank targets. Retail sales, however, remained sluggish.
China’s economic data showed modest improvement. Manufacturing returned to expansion territory and consumer spending was steady, though the property sector remained a drag. Stimulus efforts are beginning to gain traction, supporting a slow recovery.
Commodity prices were volatile, driven by geopolitical tensions early in the month, but ended below peak levels.
Axiom continues to favour dynamic growth businesses with clear earnings visibility, particularly in secular growth areas. In a low-growth environment, the team believes company-specific fundamentals will remain the key driver of outperformance.
Portfolio Commentary
The Fund outperformed its benchmark in June, supported by strong stock selection in communication services and industrials. Spotify was a key contributor following incremental pricing actions and positive subscriber trends. A recent antitrust ruling against Apple’s App Store policies also creates potential for margin upside. Netflix outperformed ahead of second-quarter results, supported by momentum in pricing, user growth and content announcements.
Taiwan Semiconductor Manufacturing Co, the world’s largest advanced chip foundry, extended its strong run after reporting May revenue growth that pushed year-to-date figures above 40%. This significantly exceeds full-year guidance and reflects accelerating demand for AI infrastructure, supported by fresh US investment incentives.
On the downside, Visa declined following headlines around stablecoin adoption and potential disruption to cross-border transactions. While Axiom views the risk as overstated, the Fund trimmed its position after strong year-to-date performance and valuation re-rating. Equinix, a global data centre operator, underperformed after updated guidance on funds from operations fell short of expectations at its capital markets day. Axiom retained the position, viewing near-term pressure as linked to proactive capacity investment amid rising generative AI demand. Cintas, a US-based business services company, also lagged due to rotation out of defensives, though it continues to deliver above-industry organic growth and margin leverage.
The Fund added to Nvidia following strong May results and signs of accelerating Blackwell-system adoption. Microsoft was also increased as Azure, its cloud computing platform, continues to show accelerating revenue and AI monetisation trends. The position in HEICO, a US-based aerospace and electronics manufacturer, was further built as fundamentals in the commercial aftermarket improve.
Two new positions were initiated. Broadcom, a US-based semiconductor designer, benefits from leadership in ethernet switching and custom chip development for hyperscalers. Fujikura, a Japan-based fibre optics supplier, is well positioned as demand for high-speed data transmission scales with AI infrastructure growth.
The Fund exited Gartner, Primo Brands and TE Connectivity due to softening operational data and a preference to reallocate to more dynamic growth exposures.
Chipotle, a US-based fast-casual restaurant group, received an ESG rating upgrade driven by governance enhancements. Engagements with Nvidia and Tradeweb, a global operator of electronic trading platforms, focused on emissions, human rights, and ESG-linked compensation targets.