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Monthly Fund Performance – December 2017

Top ten holdings

Visa
Alphabet
Heineken
BAT
Cognizant Tech Solutions
Microsoft
Paypal
Stryker Corp
Priceline
Zoetis Inc

Global stocks rose in local currencies amid strong corporate earnings growth, improving world economic data and a fourth-quarter surge in merger-and-acquisition activity. Political events also helped propel markets higher as investors cheered tax cuts in the U.S. and the re-election of Prime Minister Shinzo Abe in Japan.

Information technology stocks provided the largest gains.  Basic materials stocks also rallied on a brighter outlook for global economic growth. Heath care, utilities and telecommunication services stocks lagged the overall market.

The Fund’s unit price decreased by 1.55%, after the cost of protection, in December.  The performance was driven by positive contributions from our holdings in eBay, Twenty-First Century Fox, Comcast Corp, Reckitt Benckiser and Diageo. The main negative contributors were Zoetis Inc, Stryker Corp, Cognizant Tech Solutions, Oracle Corp and Paypal.

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.

 

Monster Beverage Corp – a long runway of growth

Over three years ago Coca-Cola took a stake in Monster Beverage Corp. Coca-Cola basically said, ‘We’re done competing in the energy drink space’. Coca-Cola currently owns about 18% of Monster. This reflected the attractive growth prospects of the industry and high barriers to entry. Red Bull, the number one player, and Monster have a combined market share in excess of 50% of the energy drinks market.

Energy drinks are part of a wider soft drink branch, that includes carbonated beverages, sports drinks, ready to go tea and coffee. Market analysis has shown that the consumers have been buying less amount of soda and increased amount of energy drinks. Penetration of energy drinks is still low, estimated to be circa 5% of the carbonated soft drinks market, and therefore provides a long run way of growth for the major players. The major industry players are very profitable delivering high margins and returns on invested capital.

Monster has been successful in taking market share by volume in the United States and this can be transferred to other key markets where the Coca-Cola Company has strong  distribution. Recent data supports our thesis with international momentum building as they fully transition to the global coke distribution system.

Our analysis indicates that Monster is undervalued based on the sustainability of its profitability and future growth opportunities. Insync’s view is that Monster is extremely well positioned to profitably participate in an attractive growth category globally with the opportunity to also take market share from its competitors.

PORTFOLIO CHARACTERISTICS
Insync risk and return capture # Monthly observation Participation compared to MSCI positive/negative markets
Score
Upside Participation 0.73 63 Higher score = Better
Downside participation 0.51 36 Lower score = Better
Capture Ratio 1.44 99 Higher towards 2 = Better

 

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.
Investment style
Concentrated, large cap global equity fund, incorporating active currency management and downside protection strategies
 

Investment  objectives

To deliver global equity like returns over rolling 5 year periods, whilst providing downside protection for severe market falls, with the aim of achieving above market results for our investors over the full cycle

 

Contact Insync
www.insyncfm.com.au
T: + 61 2 8094 1255
E: info@insyncfm.com.au