The Fund delivered a +1.9% return for January as Australian stocks rebounded after a weak final quarter of calendar 2019.
The largest positive contributor for the month was Telstra, responding to an announcement that the NBN would cease its aggressive activity in the corporate space. In effect, the NBN had been directly competing for Telstra’s corporate clients.
Read the full commentary below.
The largest positive contributor for the month was Telstra, responding to an announcement that the NBN would cease its aggressive activity in the corporate space. In effect, the NBN had been directly competing for Telstra’s corporate clients.
Industry and regulatory pressure has forced the NBN to back down, by announcing that it would no longer look to build duplicate fibre networks and also that it would cease any direct engagement with enterprises. This leaves the incumbent operators such as Telstra with the ability to continue to leverage the investment they have made in their networks, and removes the threat of a large new market entrant with a low cost of capital competing directly for enterprise business.
Continuing with the telco theme, another material contributor for January was Spark, the largest player in the New Zealand market.
Like Telstra in Australia, Spark was originally the monopoly telco operator in New Zealand. Over the last few years, in response to the opening up of the industry to competition, Spark has reinvented itself into a highly efficient operator with a strong focus on costs and capital discipline. If Telstra can replicate Spark’s achievements in those respects then we see plenty of upside in share price performance.
We continue to hold both Telstra and Spark as core positions in the fund.
The market’s strong rally over the last year has made it increasingly difficult to find new investments that meet our return hurdles. One opportunity we have recently identified is Kathmandu, an outdoor clothing and equipment retailer. The catalyst for our investment was the recent acquisition of the iconic Rip Curl surfing business.
Benefits of the acquisition we see as including:
Lastly, we now enter the important February reporting season. For listed companies, this is in effect one of the two half-yearly report cards. For investors, it is a chance to measure outcomes against expectations.
Fund Manager and Investment Analyst
Fund Manager and Investment Analyst
The strategy invests in a high conviction portfolio of Australian listed securities with sustainable and growing income streams. The Fund targets capital preservation over supernormal returns, through a consistent focus on the security selection process and careful management of portfolio exposure. The Fund seeks to generate consistent returns with a high component of the return from income, using fundamental company research to uncover investment opportunities. The Fund is managed by the Pengana Australian Equities team.
1. Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
2. A new strategy was implemented from 1 August 2017 by the Pengana team. The financial information refers to this strategy. For full performance history of the prior strategy please refer to the Pengana website.
3. Annualised standard deviation since inception.
4. Relative to ASX 300 Accumulation Index.
* For further information regarding fees please see the PDS available on our website.
