Monthly Fund Commentary – Oct 2017

October 31, 2017

Global Titans Fund commentary

 

Global stocks advanced amid signs of an improving world economy, strong corporate earnings growth and central bank stimulus measures. Japanese stocks led developed markets higher as investors welcomed the snap election victory orchestrated by Prime Minister Shinzō Abe.

Information technology stocks rallied, supported by better-than-expected corporate earnings in the sector. Basic materials stocks also enjoyed significant gains amid accelerating activity in the manufacturing sector and higher demand from China. Media and telecommunications stocks fell on concerns about the declining number of cable TV subscribers.

 

The Fund’s unit price increased by 3.8%, after the cost of protection, in October.  The performance was driven by positive contributions from our holdings in PayPal, Microsoft, Oracle, Visa and Stryker. The main negative contributors were London Stock Exchange, Unilever, Reckitt Benckiser 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.

 

Top 10 holdings

  • Heineken

  • Microsoft

  • Visa

  • Unilever

  • Alphabet

  • Priceline

  • PayPal

  • Cognizant Tech Solutions

  • Zoetis

  • Oracle

 

Visa

Still undervalued with a long run way of growth.

Many investors would consider Visa to be a well appreciated investment reflected in the current valuations. Highly profitable companies typically trade at a premium to market multiples for good reason as they have the potential to compound returns at higher rates than the average company particularly if they have a long run way of growth. We consider Visa to continue to be undervalued based on the company sustaining its high levels of profitability over the medium to long term.

 

Apart from attractive long-term trends, where the secular shift away from cash and cheques is in the early innings with 80%+ of global transactions still conducted by cash and check, there are two medium-term trends which we think will bolster Visa shares: Visa Europe and increased uptake in India. Visa acquired Visa Europe in 2016 and we believe the results will surprise on the upside and offer a multi-year earnings catalyst as cash still made up around 79 percent of everyday payments across the euro area last year, according to a European Central Bank study. In addition Visa has the opportunity to increase its fee structure in Europe as it is well below the Visa network average. In India, Prime Minister Narendra Modi’s decision to remove high value currency notes from circulation should accelerate development of electronic payments in the country.

 

Visa is deeply integrated within the payments ecosystem with Visa accounting for nearly half of all credit card transactions. As a software based business, Visa can grow with only minimal increased capital investment. As a result, incremental margins should trend higher due to tremendous operating leverage. Visa continues to be a core holding as it is a high return on capital business with a long run way of growth trading on valuations that undervalue the sustainability of its profitability over the medium term.

 

 

About Us

PORTFOLIO CHARACTERISTICS

Average market cap                   A$189.3bn

WAVG⁴ forecast dividend yield  1.50%

Wt AVG forecast PE ratio           20.3x

WAVG ROE                                21.0%

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.

 

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

 

How to apply

Apply online here.

 

 

 

 

 

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