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Monthly fund commentary – July 2017

July 2017

Top 10 holdings

Reckitt Benckiser
Cognizant Tech Solutions

Global Titans Fund commentary

Global stocks posted modest gains in local currencies, amid healthy corporate earnings reports and an improving outlook for global economic growth, but finished lower in Australian dollars. The markets seem to be largely unconcerned about the pace of interest rate increases or the unwinding of massive central bank balance sheets. Returns this month were generally led by cyclicals, with the materials, energy, financials and technology sectors among the best performing. Trailing were the more defensive health care and consumer staples sectors

The Fund’s unit price decreased by 1.5%, after the cost of protection, in July.  The performance was driven by positive contributions from our holdings in PayPal, Priceline, Diageo, Heineken and Visa. The main negative contributors were Nestle, Oracle, Reckitt Benckiser and Medtronic.

The Fund continues to have no foreign currency hedging in place as Insync consider the main risks to the Australian dollar to be on the downside.  Over 50% of the Fund is currently protected using our put protection strategy.

Reckitt Benckiser – Powerbrands and megatrends

Reckitt Benckiser (RB) is a beneficiary of 2 powerful global megatrends; the rapidly growing middle class in developing countries and the increasing demand for OTC healthcare products because of the rapidly ageing population. There has been an increasing secular trend towards self-medication which is being increasingly supported by governments keen on reducing their respective healthcare bills.

RB is a leading global fast moving consumer goods company in consumer health, hygiene and home care categories, with operations in 60 countries and sales in 180 countries. RB holds strong global market share positions behind its 19 Powerbrands, including Mucinex, Durex, Nurofen in Consumer Health and Finish, Dettol and Veet in Hygiene. The global appeal of these labels provide RB with a very high level of revenues visibility most firms can only dream of, as does its broad presence across both developed and emerging economies.

Since its creation in 1999 when Reckitt & Colman merged with Benckiser, RB has followed the same operational strategy consisting of focusing on no.1 or no.2 brands in growth and/or niche categories. Being the undisputed category leader in underpenetrated product categories offers RB superior medium and long term growth prospects and high levels of profitability. This has been supported by its relentless focus on efficiencies and by implementing a strong and differentiated corporate culture.

Insync’s view is that Reckitt Benckiser will continue to generate sustainably high returns on invested capital due to their dominant market positions and a management incentive structure focused on profitable growth, supported by two powerful megatrends providing the business with a long runway of growth. The stock trades on an attractive free cash flow yield of 5.5%.

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Monik Kotecha – Chief Investment Officer
T: + 61 2 8094 1255
E: info@insyncfm.com.au

Average market cap A$184.9bn
WAVG forecast dividend yield 1.72%
WAVG forecast PE ratio 19.3x
WAVG ROE 16.2%
Current FX hedging position 0% overseas exposure
hedged back into $A
Current put protection  50%
Benchmark Unconstrained
APIR code SLT0041AU
ASX mFund code INS01
Distributions paid Annually, as at 30 June
Unit pricing Daily
Minimum initial investment $10,000
Applications &  redemptions Each Sydney business day
Entry &  exit fee Nil
Buy/Sell spread 0.20%/0.20%
MER 1.3% (plus GST) p.a.
Investment style
Concentrated, large cap global equity fund, incorporating active currency management and downside protection strategies
Investment  objectives
To provide long term capital growth and some income through investment in listed global securities. Insync believes that a strong focus on capital preservation will lead to superior relative and absolute returns over time