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High Conviction Equities Fund

A concentrated portfolio of ethically screened global companies

April 2022 - Monthly REPORT

Contributors, Detractors, and a Webinar Recording

SUMMARY

The Fund fell 1.0% in the month of April.

Portfolio Manager James McDonald recently held a Portfolio and Investment Update webinar which can be found below. Financial planners may also complete a short questionnaire available HERE for CPD points.

PORTFOLIO

Top Holdings (alphabetically)

Ciena Corp
United States
Information Technology
Ciena Corporation develops and markets communications network platforms, software, and offers professional services. The Company's broadband access, data and optical networking platforms, software tools, and global network services support worldwide telecom and cable/MSO services providers, and enterprise and government networks.
Howard Hughes
United States
Real Estate
The Howard Hughes Corporation develops real estate. The Company manages master planned communities, shopping malls, and mixed-use developments throughout the United States.
Lamb Weston Holdings Inc
United States
Consumer Staples
Lamb Weston Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, produces and supplies frozen potato products. Lamb Weston Holdings offers fries, oven roasted potatoes, puffs, chips, slices, and prepared potato products.
NEC Electronics
Japan
Information Technology
Renesas Electronics Corporation researches, develops, designs and manufactures electronic components such as semiconductors and integrated devices.
Telix Pharmaceuticals Ltd
Australia
Health Care
Telix Pharmaceuticals Limited operates as a biotechnology company. The Company develops and commercializes molecularly-targeted radiation therapy for the treatment of prostate, renal, and brain cancer. Telix Pharmaceuticals serves patients worldwide.

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 30 Apr 20221
1 MTH 1 YEAR 2 YEARS P.A. 3 YEARS P.A. 5 YEARS P.A. SINCE INCEPTION P.A.
High Conviction Equities Fund Class A -1.0% -15.3% 9.5% 6.2% 8.7% 24.9%
MSCI World Total Return Index (net, AUD) -3.1% 4.9% 13.7% 10.1% 11.3% 11.2%
RBA Cash Rate plus 3% 0.2% 3.1% 3.1% 3.4% 3.8% 4.2%

Swipe horizontally to see all columns

Performance Chart

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

Leading US-French fry producer Lamb Weston rose 16% after reporting strong earnings driven by price increases, which were instigated to offset last year’s poor potato harvest. Operating profit margins for the company were 17% prior to Covid but are still only 10% this financial year. We are expecting a full margin recovery over the next two years.

Radiotherapy company Telix Pharmaceuticals rose 10% after commencing sales of its lead product Illucix to diagnose prostate cancer in the US market. In addition, competitor Lantheus reported strong quarterly sales for its competing prostate cancer diagnostic Plarify. Although at first instance this might sound negative, we believe it is an encouraging sign as it shows rapid adoption of the class of product (PSMA PET imaging). More importantly, Telix has a significant advantage in being able to produce its product closer and more cheaply to the end user. As a result, we expect a rapid increase in the company’s revenue over the next three quarters.

UK’s leading bowling alley owner Hollywood Bowl rose 7% after reporting exceptionally strong preliminary half-year results, with revenue rising 36% compared with pre-Covid levels in 2019 as customers rushed back to entertainment experiences.

On the negative side, US connected TV advertising technology company Magnite fell 23% on little news. Interestingly, Netflix reported weak results but stated that it plans to offer subscribers the option to pay less in exchange for watching advertisements. Magnite is very well positioned to be a service provider to Netflix as it moves to an advertising model. The company trades on 10x 2023 PE with strong mid-term revenue growth prospects of approximately 25% per annum.

Gym franchise operator F45 fell 13% on little news. The company recently reported positive results in early May. The shares are trading on 8x 2023 PE and the company is debt free with very strong growth prospects.

Optical component producer Lumentum fell 12% on little news. The company is benefitting from the build-out of data centres globally, which require the company’s lasers and optical switches. We see mid-term top-line growth of more than 10% with the shares trading on 12x 2023 PE debt free.

Australian cancer immunotherapy developer Immutep fell 13% despite being selected to give a prestigious oral presentation at the world’s largest cancer conference ASCO held in the US in the first week of June. The company will present interim data from its TACTI-002 first-line lung cancer trial which is studying a combination of the world’s leading immunotherapy drug Keytruda in conjunction with the company’s lead drug Eftilagimod. The market size for lung cancer immunotherapy is estimated to be approximately USD20bn per annum which is very large compared to the market cap of AUD330mln. We see a licensing deal or sale of the company as being very likely over the next 18months.

PROFILE

STATISTICAL DATA

PORTFOLIO SUMMARY
VOLATILITY3
24.9%
NUMBER OF STOCKS
19
BETA4
0.61
MAXIMUM DRAW DOWN
-20.2%

FEATURES

  • APIR CODE HHA0020AU
  • REDEMPTION PRICEA$ 1.0009
  • FEES * Management Fee: 1.80% p.a. (Class A) | 1.25% p.a. (Class B)
    Performance Fee: 15.38% (Class A) | 20% (Class B)
  • Minimum initial investment A$10,000
  • FUM AT MONTH END A$ 39.64m
  • STRATEGY INCEPTION DATE 11 December 2014
  • BenchmarkRBA Cash Rate + 3%

Fund Managers

James McDonald

Portfolio Manager

Jeremy Bendeich

Portfolio Manager

Description

The Pengana High Conviction Equities Fund (the Fund) invests globally in a concentrated portfolio of up to 20 stocks. The Fund can invest in both small and large cap stocks and is diversified across countries and sectors. We avoid investment in companies that are currently, in our opinion, unnecessarily harmful to people, animals or the environment.

EXPLORE OUR FUNDS

Harding Loevner International Fund
Harding Loevner International Fund
Axiom International Ethical Fund
Axiom International Ethical Fund
Axiom International Ethical Fund (Hedged)
Axiom International Ethical 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

1. Net performance figures are shown are those of Class A Units, after all fees and expenses and assume reinvestment of distributions. No allowance has been made for buy/sell spreads. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
2. Inception 11 December 2014.
3. Annualised standard deviation since inception.
4. Relative to MSCI World. Using daily returns.
* For further information regarding fees please see the PDS available on our website.