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High Conviction Equities Fund

A concentrated portfolio of ethically screened global companies

August 2022 - Monthly REPORT

UPCOMING EVENT

Contributors and detractors

SUMMARY

The Fund fell 3.5% percent in the month of August.

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.
Eckert & Ziegler Strahlen- und
Germany
Health Care
Eckert & Ziegler AG manufactures equipment for the pharmaceutical industry. The Company produces low-level radiation sources used to treat cancer, heart and other diseases, and in equipment used to calibrate gamma cameras and positron emission computer tomographs. Eckert & Ziegler also develops cancer drugs. The Company markets its products worldwide.
Kornit Digital Ltd
United States
Industrials
Kornit Digital Ltd. manufactures digital inkjet printers. The printers are used by the textile industry to print directly onto cloth. The Company also produces textile inks and other supplies.
Lumentum
United States
Information Technology
Lumentum Holdings Inc. operates as a holding company. The Company, through its subsidiaries, supplies optical and photonic products. Lumentum Holdings serves customers worldwide.
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 31 Aug 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 -3.5% -25.0% -0.4% 1.7% 9.2% 22.5%
MSCI World Total Return Index (net, AUD) -2.5% -9.5% 9.0% 8.1% 11.0% 10.4%
RBA Cash Rate plus 3% 0.4% 3.4% 3.3% 3.4% 3.8% 4.2%

Swipe horizontally to see all columns

Performance Chart

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

Strong performance was recorded by US software company Walkme, which rose 27% after quarterly results highlighted plans to reach free cashflow breakeven in 2023. We like the company, it is trading on a low multiple of sales compared to peers and one third of its market cap is in cash, which is far more than it needs to reach breakeven. The company expects to achieve US federal government certification for its products at the end of 2022, which will create significant future opportunities.

Ardent Leisure, owner of the Dreamworld theme parks, rose 19% in the month after selling its US business and returning capital to shareholders. Visits to Dreamworld are running well ahead of 2019 levels despite poor weather and lack of some foreign tourists, which in aggregate account for 20% of revenue, although New Zealand represents the largest portion of this.

US listed fabric and fashion printer company Kornit Digital rose 16% after reporting results that exceeded low expectations following a profit warning in July. The company has 50% of its market cap held in cash, which allowed it to announce a $75mln share buy back. The company will benefit from internet and fashion groups shortening their supply chains.

On the negative side, our healthcare holdings performed poorly following a strong previous month including Photocure -9%, Immutep -16%, Tenant Healthcare -13%, Eckert and Ziegler -8% and Telix -16%.

Australian listed radiation therapy and diagnostic producer Telix was the largest detractor after announcing full year results in which the company reported sales of its newly reimbursed prostate cancer diagnostic Illucix only for the first month of the new financial year, namely July, rather than give any forecasts. We expect sales of the product will continue to ramp strongly over the coming months and look forward to the company’s update for the September quarter late in October. We also expect the approval of the product in Europe by the end of September, and data from the Phase 3 renal cancer diagnostic study and Phase 2 data from the brain cancer therapeutic study provide additional short-term catalysts. Brain cancer has a high unmet need for new therapies given the limited treatment options and poor prognosis which could potentially make this their first therapeutic product to reach the market. We still view Telix’ market value of USD1.2bn as being greatly undervalued compared to its main competitor Lantheus, which has a market cap of USD5.8bn. Although Lantheus had a 7 month head start in the prostate cancer diagnostic market, we believe Telix can close the gap and has a much stronger pipeline of products.

PROFILE

STATISTICAL DATA

PORTFOLIO SUMMARY
VOLATILITY3
24.9%
NUMBER OF STOCKS
18
BETA4
0.62
MAXIMUM DRAW DOWN
-28.4%

FEATURES

  • APIR CODE HHA0020AU
  • REDEMPTION PRICEA$ 0.9308
  • 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$10,000
  • FUM AT MONTH END A$ 38.74m
  • 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.