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Pengana International Equities Limited (ASX: PIA)

The largest International Ethical LIC on the ASX. Targeting fully franked dividends, paid quarterly.

November 2022 - Monthly REPORT

Signs that inflationary pressures may be starting to ease

SHARE PRICE

NTA POST-TAX

NTA PRE-TAX

INVESTMENT PERFORMANCE1

DIVIDEND YIELD2

CONSECUTIVE DIVIDENDS PAID

1. Investment performance since new mandate adopted 1 July 2017.
2. Dividend yield is based on current displayed share price and dividends declared over the previous 12 months
3. Grossed up yield is based on current displayed share price, dividends declared over the previous 12 months and the tax rate and franking percentage applicable for the most recently declared dividend

SUMMARY

  • Global share markets continued to perform well in November upon signs that inflationary pressures may be starting to ease.
  • Chinese stocks rebounded strongly when the government appeared to take the first steps to unwind its zero-Covid policy and more fully re-open the economy.
  • The Portfolio returned 4.1% in November, while the benchmark returned 2.1%.

PORTFOLIO

Top Holdings (alphabetically)

Alphabet Inc
United States
Communication Services
Alphabet Inc. operates as a holding company. The Company, through its subsidiaries, provides web-based search, advertisements, maps, software applications, mobile operating systems, consumer content, enterprise solutions, commerce, and hardware products.
AMETEK Inc
United States
Industrials
AMETEK, Inc. is a global manufacturer of electronic instruments and electromechanical devices. The Company manufactures advanced instruments for process, aerospace, power, and industrial markets and is a supplier of electrical interconnects, specialty metals, technical motors and systems, and floor care and specialty motors.
Deere & Co
United States
Industrials
Deere & Company manufactures and distributes a range of agricultural, construction, forestry, and commercial and consumer equipment. The Company supplies replacement parts for its own products and for those of other manufacturers. Deere also provides product and parts financing services. Deere and Company extends its services and products worldwide.
First Republic Bank
United States
Financials
First Republic Bank and its subsidiaries provide private banking, private business banking and private wealth management in urban, coastal markets in the U.S. First Republic delivers relationship-based service by providing a single point of contact for all of its services.
HDFC Bank Ltd
India
Financials
HDFC Bank Ltd. offers a wide range of services to the global corporate sector. The Bank provides corporate banking and custodial services and is active in the treasury and capital markets. HDFC also markets project advisory services and capital market products such as Global Deposit Receipts, Euro currency loans, and Euro currency bonds.
Microsoft
United States
Information Technology
Microsoft Corporation develops, manufactures, licenses, sells, and supports software products. The Company offers operating system software, server application software, business and consumer applications software, software development tools, and Internet and intranet software. Microsoft also develops video game consoles and digital music entertainment devices.
Schneider Electric SE
France
Industrials
Schneider Electric SE manufactures electrical power products. The Company offers car chargers, home security goods, light switches, access control, sensors, valves, circuit breakers, cables, accessories, signaling devices, fuse, motor starters, and voltage transformers. Schneider Electric serves customers worldwide.
Synopsys Inc
United States
Information Technology
Synopsys, Inc. supplies electronic design automation solutions to the global electronics market. The Company provides design technologies to creators of advanced integrated circuits, electronic systems, and systems on a chip. Synopsys also provides consulting services and support to its customers to streamline the overall design process and accelerate time to market.
UnitedHealth Group Inc
United States
Health Care
UnitedHealth Group Incorporated owns and manages organized health systems. The Company provides employers products and resources to plan and administer employee benefit programs. UnitedHealth serves customers in the United States.
Vertex Pharmaceuticals Inc
United States
Health Care
Vertex Pharmaceuticals Incorporated discovers, develops, and commercializes pharmaceutical products. The Company develops drugs for the treatment of cystic fibrosis, cancer, inflammatory bowel, autoimmune disease, and neurological disorders. Vertex Pharmaceuticals serves healthcare sector worldwide.
See Portfolio Breakdown

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 30 Nov 20221
1M 1Y 3Y Pengana SI
July 20171
(ASX: PIA) 4.1% -22.3% 3% 6.7%
Index2 2.1% -5.6% 7.9% 11.3%

 

Swipe horizontally to see all columns

COMMENTARY

Market Review
The MSCI World  Total Return Index, Net Dividend Reinvested, AUD returned 2.1% during November. Australian dollar strength detracted from share price gains.

Global share markets continued to rebound from the low point reached in mid-October, despite the US Federal Reserve (Fed) and the Bank of England raising interest rates. However, investor sentiment improved on better-than-expected inflation data in the United States and Germany, fueling hopes that US inflation has peaked. The Fed is now expected to reduce the interest rate increase to 0.50% at its next meeting in mid-December, following four successive 0.75% increases to the present 3.75% – 4.00% level.

Emerging Markets posted the strongest returns of any region during November. Chinese equities rose nearly 30% after the government partially eased its zero-COVID policy and unveiled a support package aimed at boosting liquidity in the property sector.

Portfolio Comment
During November, the Portfolio outperformed the benchmark by 2.0% as global value stocks outperformed growth.

All market sectors posted positive returns. The Portfolio benefitted from the underweight position in energy, but the overweight positions in cash and materials and the underweighting to healthcare detracted from relative returns.

The Portfolio’s outperformance was driven by strong stock selection across most sectors, but especially in information technology and consumer discretionary.

The Portfolio continues to find high quality, durable growth companies in the healthcare sector. The eye care industry is characterised by high barriers to entry, fewer participants and good long-term growth prospects driven by an aging population. Yet stocks in this segment remain generally underappreciated by investors.

Alcon is a leader in both ophthalmic surgery solutions and contact lenses. It is expected to benefit from the anticipated growth in cataract surgeries and rising contact lens adoption in less developed markets. Sales fell in 2020 as elective eye care procedures and purchases were postponed during the pandemic but have since rebounded.

Alcon continues to innovate, creating strong demand for new products such as reengineered contact lenses which focus on easing dry eye and an advanced technology intraocular lens product. The company raised its full year guidance in its most recent earnings update.

The company’s holdings in the semiconductor businesses ASML and TSMC contributed to the Portfolio outperforming the market during November. The cyclicality in demand for semiconductor stocks had left these companies attractively valued following a period of underperformance. This is now being discounted by the market, which is again focusing on business fundamentals.

Shares of Brazilian stock exchange operator B3 detracted from the Portfolio’s performance in the financials sector. Investor sentiment has turned more negative upon fears that the fiscal deficit will rise in the wake of Lula da Silva’s election as President.

The Portfolio ’s US holdings outperformed the broader market in November. Etsy is a global e-commerce company which focusses on arts and crafts created by independent sellers, often as a secondary income. The share price rebounded strongly after the company reported better than expected earnings due to improving consumer demand.

PROFILE

STATISTICAL DATA (Since Mandated)

PORTFOLIO SUMMARY
VOLATILITY3
11.2%
NUMBER OF STOCKS
66
BETA4
0.82

FEATURES

  • ASX CODE PIA
  • FEES Management Fee: 1.23% p.a.
    Performance Fee: 15.38% of any return greater than the Index***
  • INCEPTION DATE 19 March 2004
  • MANDATED 1 July 2017
  • BenchmarkMSCI World Total Return Index, Net Dividend Reinvested, in A$ ("Index")
  • NTA Post Tax ** A$ 1.162
    30/11/2022
  • NTA Pre Tax ** A$ 1.149
    30/11/2022
  • Price Close ** A$ 0.930
  • Shares On Issue ** 256.32m
  • Premium/Discount to pre-tax NTA ** -19.1%
  • DRP Yes

Portfolio Managers

Peter Baughan

Portfolio Manager

Jingyi Li

Portfolio Manager

Description

Pengana International Equities Limited (trading on the ASX as PIA) is the largest international ethical Listed Investment Company (“LIC”) on the ASX. PIA’s objective is to provide shareholders with capital growth as well as regular, reliable, and fully franked dividends.

The strategy aims to generate superior risk-adjusted returns, through investing in an actively managed portfolio of global companies that meet the investment team’s high-quality and durable growth criteria at reasonable prices. A robust ethical framework provides an added layer of risk mitigation.

These companies are identified through the conduct of fundamental research, with a long-term, global perspective, and must exhibit the following four key investment criteria: competitive advantages, quality management, financial strength, and sustainable growth potential.

EXPLORE OUR FUNDS

Harding Loevner International Fund
Harding Loevner International Fund
Axiom International Fund
Axiom International Fund
Axiom International Fund (Hedged)
Axiom International Fund (Hedged)
Australian Equities Fund
Australian Equities Fund
High Conviction Property Securities Fund
High Conviction Property Securities Fund
Global Small Companies Fund
Global Small Companies Fund
WHEB Sustainable Impact Fund
WHEB Sustainable Impact Fund
Emerging Companies Fund
Emerging Companies Fund
High Conviction Equities Fund
High Conviction Equities Fund
Pengana International Equities Limited (ASX: PIA)
Pengana International Equities Limited (ASX: PIA)
Private Equity Trust (ASX: PE1)
Private Equity Trust (ASX: PE1)
Alpha Israel Fund
Alpha Israel Fund
Pengana Diversified Private Credit Fund
Pengana Diversified Private Credit Fund

1. As at the last day of last month prior to publishing of this report. Performance figures refer to the movement in net assets per share, reversing out the impact of option exercises and payments of dividends, before tax paid or accrued on realised and unrealised gains. Please refer to the PDS for information regarding risks. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
2. Inception date of PIA: 19 March 2004, new investment team with new mandate adopted: 1 July 2017. Pengana International Equities Limited has been managed under the new investment mandate by the Pengana investment team since 1 July 2017. The performance since mandated in the table above refers to the movement in net assets per share since the new mandate adopted on 1 July 2017.

3. Annualised Standard Deviation since mandated
4. Relative to MSCI World Total Return Index, Net Dividends Reinvested
**As at the last day of last month prior to publishing of this report. The figures are unaudited.
*** Index/MSCI World refers to the MSCI World Total Return Index, Net Dividends Reinvested, in A$.