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Monthly fund commentary – June 2017

June 2017

PDF version: June 2017

Top 10 holdings

PayPal
Comcast
Heineken
Cognizant Tech Solutions
Visa
Reckitt Benckiser
Unilever
BAT
Microsoft
Oracle

Global Titans Fund commentary

During the month, global stocks advanced in local currencies amid accelerating economic growth in the U.S. and Europe, coupled with signs of diminishing political risk in the euro zone. Investor sentiment improved markedly as political newcomer Emmanuel Macron defeated Marine Le Pen in the French presidential election, largely erasing concerns that France may attempt to leave the European Union.

The Fund’s unit price decreased by 2.3% in June, after the cost of protection, compared to the benchmark return of -2.6%.   The stronger Australian dollar was the major driver behind the negative returns for the fund and the benchmark. The performance was driven by positive contributions from our holdings in Oracle Corp, Bank of New York Mellon, Medtronic, London Stock Exchange and Amadeus IT. The main negative contributors were Alphabet, Visa, Unilever, BAT and Comcast Corp.

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.

There were no new buys during the month. The only major sale was Thermo Fisher Scientific on the basis that the company had reached our valuation target and the return on invested capital was not improving in line with our expectations.

 

The Priceline Group – Global Experience Megatrend

Recent data from many economies show that consumers are spending more on experiences than goods. Insync have identified the global travel megatrend as a powerful secular trend that is benefitting from this shift in spending. One of our key holdings that is exposed to this long term trend is The Priceline Group.

The Priceline Group is a global online travel company (OTA) that offers its customers the opportunity to purchase hotel room reservations, car rentals, airline tickets, vacation packages, cruises & destination services in a price-disclosed manner. Booking.com has emerged as the dominant global OTA, as it has created a very large marketplace that connects travellers with a vast supply of fragmented hotel and alternative accommodation inventory around the world. It is the category leader with unparalleled global scale in online travel and also well positioned for an acceleration in Asian and Chinese travel growth in the years ahead.

We anticipate the online share of bookings will grow from one-sixth now to one-third over the next 15 years, a rate of growth consistent with what has been seen over the last decade. Insync believe Priceline will be a major beneficiary of this trend being the industry leader. Our confidence in this is helped by data from specialist industry researchers which show the percentage of consumers shopping on websites is almost twice as high as the percentage which go on to book. With consumers increasingly comfortable booking online, we expect to see this conversion rate go up, whilst growing levels of internet access will also continue to be a helpful factor.

Priceline is a high return on capital business with net cash on the balance sheet and a long runway of growth which Insync believe is underappreciated by many investors. The company is a beneficiary of two global megatrends colliding; the growth in experiences and the growth in online bookings.

Apply online.

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

PORTFOLIO CHARACTERISTICS
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
KEY INFORMATION
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.
Performance fee 15% (plus GST)
Of any performance above the RBA cash rate plus 2% based on annual performance, with high water mark protection for investors
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