VAM Funds (Lux) Commentaries

August 2020 (click here to download)

VAM US Micro Cap Growth Fund

The VAM Funds (Lux) – The US Micro Cap Growth Fund performance benefitted from holdings in the health care and financials sectors. Holdings in the real estate and consumer discretionary sectors detracted from relative returns. At month end, the Fund was overweight the financials and consumer discretionary sectors and underweight in the health care and real estate sectors.

The holding that contributed the most to the Fund’s return during the month was GrowGeneration Corp. (ticker: GRWG). Grow Generation owns and operates 28 specialty hydroponic and organic gardening stores. GrowGeneration contributed in August as the stock rose after reporting strong second quarter earnings. Sales and earnings before interest, taxes,  depreciation and amortisation (EBITDA) exceeded expectations. 2020 guidance was increased, and 2021 guidance was initiated well above consensus expectations. After significant stock appreciation, the Manager modestly reduced the position.

The holding that detracted the most from the Fund’s return during the month was Vapotherm, Inc. (ticker: VAPO). Vapotherm is a commercial stage medical device company selling oxygenation systems to hospitals. Strong COVID driven sales in the first quarter raised expectations for second quarter performance. Despite growth that exceeded preCOVID levels, the company missed those expectations when it reported second quarter earnings in early August. The Manager trimmed its position due to technical and portfolio management dynamics, but maintains exposure due to the strength and differentiation of the business.

VAM US Small Cap Growth Fund

Holdings in the information technology and consumer discretionary sectors detracted from relative returns. Performance benefitted from holdings in the health care and financials sectors. At month end, the Fund was overweight the financials consumer and discretionary sectors and underweight in the health care and information technology sectors.

The holding that detracted the most from the Fund’s return during the month was Alteryx, Inc. (ticker: AYX). Alteryx is a self-service data analytics software vendor. In the month of August, Alteryx detracted from the strategy. The company reported fiscal second quarter earnings and provided guidance for the second half below expectations, as sales cycles were negatively impacted by COVID-related push outs. The Manager decided to eliminate the position in light of this new information.

The holding that contributed the most to the Fund’s return during the month was Natera, Inc. (ticker: NTRA). Natera is a commercial stage molecular diagnostics company that commercialises tests in women’s and pre-natal health, transplant and oncology. In August, a national advisory body that recommends treatment protocols for pre-natal care expanded their use-case recommendation for one of Natera’s tests, leading to positive estimate revisions. The Manager maintains a significant position due to the company’s execution in its base business, as well as its positioning as a leader in the nascent and large cancer recurrence monitoring testing market.

VAM US Mid Cap Growth Fund

The VAM Funds (Lux) – US Mid Cap Growth Fund performance benefitted from holdings in the health care and consumer discretionary sectors. Holdings in the information technology and materials sectors detracted from relative returns. At month end, the Fund was overweight the health care, consumer discretionary and materials sectors, and underweight in the information technology sector.

The holding that contributed the most to the Fund’s return during the month was Carvana Co. (ticker: CVNA). Carvana is a leading e-commerce platform for buying and selling used cars. Carvana contributed in August as the stock rose after reporting second quarter earnings. While business was impacted by COVID, demand rebounded faster than expected and Carvana described its business as being supply constrained. With supply exceeding demand, investors reacted positively. The Manager modestly reduced the position after meaningful stock appreciation.

The holding that detracted the most from the Fund’s return during the month was Alteryx, Inc. (ticker: AYX). Alteryx is a  self-service data analytics software vendor. In the month of August, Alteryx detracted from the strategy. The company reported fiscal second quarter earnings and provided guidance for the second half below expectations, as sales cycles were negatively impacted by COVID-related push outs. The Manager decided to eliminate the position in light of this new information.

VAM US Large Cap Growth Fund

Holdings in the consumer discretionary and information technology sectors detracted from relative returns. Performance benefitted from holdings in the real estate and utilities sectors. At month end, the Fund was overweight the utilities and information technology sectors and underweight the real estate and consumer discretionary sectors.

The holding that detracted the most from the Fund’s return during the month was Thor Industries, Inc. (ticker: THO). Thor Industries, Inc. engages in the manufacture and sale of recreational vehicles. The company performed largely in line with consumer trends, but expectation for a stronger fourth quarter should play out as the recreational vehicle demand continues to be strong, given the pandemic.

The holding that contributed the most to the Fund’s return during the month was Apple Inc. (ticker: AAPL). Apple, Inc. engages in the design, manufacture and sale of smartphones, personal computers, tablets, wearables and accessories, and other variety of related services. The company expects iPhone demand to remain resilient in the face of pandemic and potential upcoming 5G tailwinds.

VAM Emerging Markets Growth Fund

The VAM Funds (Lux) – Emerging Markets Growth Fund performance was aided by holdings in the communication services and information technology sectors, as well as in United States and Hong Kong. Exposures to consumer discretionary and consumer staples sectors, as well as in China and Brazil, detracted from relative returns. At month end, the Fund was overweight United States and underweight China.

The holding that contributed the most to the Fund’s return during the month was Alibaba Group Holding Ltd, Sponsored ADR (ticker: BABA). Alibaba rose late in the month after reporting strong first quarter fiscal year 2021 results. The company’s revenue grew 34% year over year, ahead of expectations, as growth rebounded across segment as the Chinese economy continues to recover from COVID-19. Additionally, Ant Group, the world’s most valuable unicorn, filed to list shares in both Hong Kong and Shanghai. This has been long expected but will crystallise the value of Alibaba’s stake in Ant.

The holding that detracted the most from the Fund’s return during the month was B3 SA – Brasil, Bolsa, Balcao (ticker: B3SA3-BR). B3 operates financial exchanges in Brazil and provides clearing/settlement services. While traded volume in Brazil has been high, the stock has recently corrected as expectations and valuation for the stock are both elevated. They reported their second quarter results mid-month, where net income missed slightly due to a number of small transitory issues. The Manager remains positive on the long-term growth potential but has reduced its position as relative risk/reward has depreciated after strong performance in the first half of the year.

VAM World Growth Fund

Exposures in the information technology and consumer staples sectors, as well as in Japan and Taiwan, detracted from relative returns. Performance was aided by exposures in the health care and consumer discretionary sectors, as well as in the United Kingdom and the United States. At month end, the Fund was underweight the United Kingdom and Japan.

The holding that detracted the most from the Fund’s return during the month was Alteryx, Inc. (ticker: AYX). Alteryx is a self-service data analytics software vendor. In the month of August, Alteryx detracted from the strategy. The company reported fiscal second quarter earnings and provided guidance for the second half below expectations, as sales cycles were negatively impacted by COVID-related push outs. The Manager decided to eliminate the position in light of this new information.

The holding that contributed the most to the Fund’s return during the month was ASOS plc (ticker: ASC-GB). Asos is a leading UK-based online fashion and retail company, focused on name brand and own brand apparel for the 20 to 40-year-old consumer. The company has global operations, but the majority of their exposure is across the United Kingdom and Eurozone. Like many online-focused companies, they have been benefitting substantially during the current work from home and shop at home environment, but they have an advantage as they have been in business for nearly 20 years and have already built up a substantial online brand name and cache. In mid-July, they reported third quarter results that substantially exceeded estimates and raised guidance for the remainder of the year. This drove strong outperformance that carried through August. In addition, the Manager also owns one of their top competitors, German-based Zalando, which is benefitting from the same strong demand trends.

VAM International Real Estate Equity Fund

The VAM Funds (Lux) – International Real Estate Equity Fund performance was aided by exposures in China and Japan. As exposures in Hong Kong and Australia detracted from relative returns at month end, the Fund was overweight China and Hong Kong.

The holding that contributed the most to the Fund’s return during the month was Open House Co, Ltd. (ticker: 3288-JP). Open House Co. Ltd engages in real estate agency and brokerage business. The company appreciated based on brisk single-family home demand coupled with stable gross margins.

The holding that detracted the most from the Fund’s return during the month was Zhenro Properties Group Limited (ticker: 6158-HK). Zhenro Properties Group Ltd is a holding company which engages in the provision of property development, property leasing and commercial property management. Given the company’s improvement in debt mix and its overall leverage is declining, the company is on track to hit its contracted sales target and should be able to increase its profitability.

VAM International Opportunities Fund

Exposures to the consumer staples and health care sectors, as well as in Japan and the United Kingdom, detracted from relative returns. Performance was aided by holdings in the information technology and materials sectors, as well as in the Netherlands and Germany. As of month end, the Fund was overweight the Netherlands and underweight Japan.

The holding that detracted the most from the Fund’s return during the month was CKD Corporation. (ticker: 6407-JP). CKD Corp is a Japanese based manufacturer of pneumatic (air pressured) equipment, control valves and cylinders for industrial automation equipment, and semiconductor production equipment. The industry has been benefitting from a strong recovery, both before and after the height of the pandemic, given two years of underinvestment across various industrial and semiconductor industries. Unfortunately, a rising tide does not always lift all boats (contrary to popular opinion) and in mid-August, the company reported weakerthan-expected results citing increasing competition and losing market share. The Manager maintains a small position but will most likely be exiting soon.

The holding that contributed the most to the Fund’s return during the month was Alfen NV (ticker: ALFEN-NL). Alfen is the leading provider of energy equipment including transformers, substations, charging and storage systems for electric vehicles (EVs) and energy grid improvement automation and monitoring solutions across the Nordic region. The company is expanding into other European countries. They are benefitting from multiple drivers such as updating energy grids, new charging stations for EVs to energy storage solutions for solar and wind energy systems, and increasing efficiency/monitoring for datacentres in an ever-demanding world for online, smartphone and computing energy needs. In mid-August, they reported very strong results with strong guidance for all their divisions for the remainder of the year and into 2021, which drove strong outperformance during the month. The Manager had a sizeable position going into results and given the outperformance and now relatively high valuation, it is considering reducing the position in the near term, but still believes very strongly in the long-term growth runway.

Sources: Driehaus Capital Management LLC, FactSet Research Systems, Inc., Reuters, Yahoo Finance and Bloomberg.

Featured securities were the top contributor to or detractor from return and were held by the Fund at some point during the month of August 2020. The performance numbers for the Funds are provided by VAM Funds (Lux). The performance discussed above represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance quoted.

The information presented is intended for the sole and exclusive use of VAM Funds and contains confidential information that should only be relied on by the intended recipient.

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