The Fund rose 1.8%1 in November, underperforming the Small Industrials by 1.0% and outperforming the Small Ordinaries Indices by 0.3%1. For the 12 months to November, the Fund was up 17.8%1, underperforming the Small Industrials Index by 3.6%1 and outperforming the Small Ordinaries Index by 1.2%1.
Senior Fund Manager
Senior Fund Manager
The Pengana Emerging Companies Fund combines the skills of highly experienced small company investors (collectively over 45 years’ experience) with a limited fund size and an objective of providing above market returns over the medium term. Our benchmark is the S&P/ASX Small Ordinaries Accumulation Index. The fund managers Steve Black and Ed Prendergast are part owners of the business and investors in the Fund, providing a strong incentive to perform. The Fund has strong research ratings from all major research houses and over the period since its inception has delivered returns well above benchmark.
1. Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. No allowance has been made for buy/sell spreads. 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 1 November 2004.
* For further information regarding fees please see the PDS available on our website.
** The Fund does not invest in resource stocks.
COMMENTARY
Global markets were strong in November, continuing the momentum established in October. The US market made fresh all-time highs driven by the tech sector. The NASDAQ index is now up 30.6% this calendar year after a 4.5% rise in November alone.
The domestic share market lifted 2.6%, also driven by the tech sector which is now up 42.9% in 2019 after a 10.6% boost in November. Defensive sectors like healthcare (+8.8% in Nov) Consumer staples (+8.1%) were positively impacted by further strength in the Australian 10 year bond market, based on the expectation of further rate cuts and potential quantitative easing by the RBA in 2020.
We have been vocal about needing to retain a sober approach to tech stocks on stretched valuations and are happy to have sold our holdings into strength in stocks like Promedicus, Jumbo Interactive in August.
But we take each stock on its merits, and retain positions in high growth stocks such as EML Payments and Technology One, which we believe have identifiable growth, consistent management, and relatively lower risk than some high profile stocks.
EML Payments recently made a large acquisition in the UK of a complementary business called Prepaid Financial Services which resulted in EPS upgrades of 25%. Technology One posted its full year results showing 50% profit growth as its customers move onto its cloud based offering which involves long term contracts and more secure income.
Both companies have stable, proven management teams and very promising growth potential, however the fast pace of change in the sector causes us to keep modest exposures compared to other industries.
Key stock price moves in November
Key successes during November were Technology One (+25%), EML Payments (+20%), Cleanaway (+15%), ALS Ltd (+12%), and Mainfreight (+4%). Key detractors were Smart Group (-21%), AP Eagers (-20%), HUB 24 (-12%), McMillan Shakespeare (-7%), and Charter Hall (-4%).