SUMMARY
The Fund rose 2.7% in May, outperforming the Small Industrials by 3.6% and outperforming the Small Ordinaries by 2.7%. For the 12 months to May, the Fund was up 15.9%, outperforming the Small Industrials Index by 4.5% and outperforming the Small Ordinaries Index by 5.0%.
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COMMENTARY
The US market was up 2.3% in May, reversing the 5% fall in April. Once again, markets were driven by the ever changing outlook on inflation and interest rates. Short term data are the key drivers of the swings, with employment and inflation readings feeding into expectations of potential rate cuts. The timing, quantum and likelihood of rate cuts are far from certain, and this uncertainty is likely to remain a source of volatility. The Australian share market rose 0.5% with no major outliers in performance by sector. Smallcap stocks drifted, with mining stocks slightly outperforming the industrial sector.
Our key positive contributors in May were:
Catapult (+32%) released its full year results, with 20% growth in forward revenue, expanding margins, improved customer retention and positive comments on future growth. Gentrack (+18%) released its half-year results, which showed adjusted revenue growth of 58%, strong margins, and further growth potential as it expands into Europe. ALS Corp (+8%) reported full year results with 7% revenue growth and flat earnings due primarily to slow exploration activity among smaller mining companies. The stock has rallied on the expectation that this cycle is likely to turn given the recent burst in copper and gold prices. Webjet (+7%) released its full year profits showing revenue growth of 29% and underlying earnings growth of 40% driven by the wholesale hotel operations, which offer further opportunities for growth. EQT Holdings (+6%) rose following the sale of its loss making Irish operations.
Our key negative contributors in May were:
Audinate (-17%) was weak following the retirement of its well-regarded CFO (Rob Goss) for personal reasons. IVE Group (-10%) drifted after news of the passing of its Executive Chairman Geoff Selig who was an instrumental in the company’s culture and growth. Praemium (-9%) was weak with no particular catalyst. Aussie Broadband (-7%) posted a Q3 update showing overall earnings on track to meet forecasts, notwithstanding slight weakness in growth in the domestic broadband operation. Worley (-3%) was slightly soft given the 7% fall in oil prices.