VAM Funds (Lux) Commentaries

February 2020 (click here to download)

VAM US Micro Cap Growth Fund

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

The holding that contributed the most to the Fund’s return during the month was Schrodinger, Inc. (ticker: SDGR-US). Schrodinger sells software to drug developers on a subscription basis and has a proprietary drug pipeline as well. During February, Schrodinger came public at a price of $17 per share and currently trades at $44 per share. The strong market reception reflects the positive dynamics of the company’s SaaS (software) business, as well as the differentiated potential of their proprietary pipeline. The Manager maintained its position exiting the month.

The holding that detracted the most from the Fund’s return during the month was Perficient, Inc. (ticker: PRFT-US). Perficient provides business optimisation and information technology services solutions for enterprises. The stock declined in the month of February post its earnings report. The company appreciated materially into the report, but it missed consensus revenue expectations by less than 1%, resulting in disappointment. The Manager believes this is a temporary revenue recognition issue as bookings activity in the quarter remained very strong. The Manager maintained its position exiting the month.

VAM US Small Cap Growth Fund

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

The holding that contributed the most to the Fund’s return during the month was Enphase Energy, Inc. (ticker: ENPH-US). Enphase manufactures microinverters for the solar industry. The stock appreciated in February as the company reported very strong earnings, which were handily better than expectations. Additionally, the company’s commentary on their new energy management platform was positive. The Manager maintained its position exiting the month.

The holding that detracted the most from the Fund’s return during the month was Crocs, Inc. (ticker: CROX-US). Crocs is a world leader in innovative casual footwear. The company was a top detractor during the month as the stock sold off in the face of disruption to their business in Asia because of the Coronavirus, and potential future disruption in Europe and the Americas. The Manager reduced its position as a result.

VAM US Mid Cap Growth Fund

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

The holding that contributed the most to the Fund’s return during the month was Enphase Energy, Inc. (ticker: ENPH-US). Enphase manufactures microinverters for the solar industry. The stock appreciated in February as the company reported very strong earnings, which were handily better than expectations. Additionally, the company’s commentary on their new energy management platform was positive. The Manager maintained its position exiting the month.

The holding that detracted the most from the Fund’s return during the month was Crocs, Inc. (ticker: CROX-US). Crocs is a world leader in innovative casual footwear. The company was a top detractor during the month as the stock sold off in the face of disruption to their business in Asia because of the Coronavirus, and potential future disruption in Europe and the Americas. The Manager reduced its position as a result.

VAM US Large Cap Growth Fund

Holdings in the industrials and financials sectors detracted from relative returns. Performance benefitted from holdings in the utilities and consumer staples sectors. At month end, the Fund was overweight the utilities and financials sectors, and underweight the consumer staples and industrials sectors.

The holding that detracted the most from the Fund’s return during the month was Apple Inc. (ticker: BWA-US). Apple, Inc. engages in the design, manufacture and sale of smartphones, personal computers, tablets, wearables and accessories, and a variety of other related services. Apple declined as the company announced that it does not expect to meet previously provided March quarter revenue guidance due to Coronavirus impacting iPhone manufacturing and China demand.

The holding that contributed the most to the Fund’s return during the month was NVIDIA Corporation (ticker: NVDA-US). NVIDIA Corp. engages in the design and manufacture of computer graphics processors, chipsets and related multimedia software. NVDIA was up following fourth quarter results that topped consensus driven by strong data centre revenues and expected improvement in gaming.

VAM Emerging Markets Growth Fund

The VAM Funds (Lux) – Emerging Markets Growth Fund performance was aided by holdings in the health care and materials sectors, as well as in South Korea and South Africa. Exposures to financials and real estate sectors, as well as in Taiwan and Russia, detracted from relative returns. At month end, the Fund was underweight South Korea and Taiwan.

The holding that contributed the most to the Fund’s return during the month was Wuxi Biologics (Cayman) Inc. (ticker: 2269-HK). Wuxi Biologics is a pharmaceutical contract manufacturing organisation. The stock outperformed in February along with other China health care stocks as the Coronavirus outbreak accelerated. Wuxi Biologics also said it is working with multiple global partners on potential treatments for the virus.

The holding that detracted the most from the Fund’s return during the month was LUKOIL PJSC Sponsored ADR (ticker: LKOD-GB). Lukoil is a Russian oil and gas company. The shares underperformed in February due to a sharp sell-off in oil prices, which came under pressure as the spreading of the Coronavirus drove a negative reassessment of demand growth.

VAM World Growth Fund

The VAM Funds (Lux) – World Growth Fund performance was aided by exposures in the information technology and health care sectors, as well as in the United States and China. Exposures in financials and consumer discretionary sectors, as well as in the United Kingdom and Brazil, detracted from relative returns. As of month end, the Fund was overweight the United Kingdom and underweight the United States.

The holding that contributed the most to the Fund’s return during the month was Enphase Energy, Inc. (ticker: ENPH-US). Enphase is a California-based leading supplier of solar power modules, panels and energy storage solutions (battery packs to store solar generated power on a sustainable basis). Having reported several strong quarters of growth, the company unexpectedly announced weaker-than-expected third quarter results in late October citing an unforeseen slowdown in end market demand and installations. This caused a substantial drawdown in the stock as a result. Since then, their recently launched Ensemble Solution, which is considered the next generation industry standard in solar energy storage solutions, has
been gaining a lot of traction and positive commentary from the analysts who cover the company. In addition, they recently reported much better-than-expected results in mid-February and provided a very strong outlook regarding demand for the remainder of 2020.

The holding that detracted the most from the Fund’s return during the month was WH Smith PLC. (ticker: SMWH-GB). WH Smith is a leading global travel retailer of books, magazines and other periodicals at stores located in airports and hotels around the world. There has been no recent company-specific news, but clearly the stock is being disproportionately punished due to macro concerns surrounding the Coronavirus and the subsequent slowdown in travel globally. The Manager continues to like the company’s business model and longer-term store expansion and growth plan, and continues to hold the position during the recent volatility.

VAM International Real Estate Equity Fund

The VAM Funds (Lux) – International Real Estate Equity Fund performance was aided by exposures in Hong Kong and Canada. Exposures in the Philippines and Guernsey detracted from relative returns. As of month end, the Fund was overweight the Philippines and Hong Kong.

The holding that contributed the most to the Fund’s return during the month was Wheelock & Co. Ltd. (ticker: 20-HK). Wheelock & Co. Ltd. is an investment holding company which engages in property investment and development. It operates through the following segments: Investment Property, Development Property, Hotels, Logistics, Communications, Media and Entertainment (CME), and Investment and Others. Wheelock was up as the company will be taken private.

The holding that detracted the most from the Fund’s return during the month was SEGRO plc (ticker: SGROGB). SEGRO Plc is a real estate investment trust which owns, manages and develops modern warehouses and light industrial properties. Segro declined as the company reported solid yet slowing earnings growth creating pressure on its valuation multiple.

VAM International Opportunities Fund

The VAM Funds (Lux) – International Opportunities Fund performance was aided by holdings in the information technology and materials sectors, as well as in Japan and France. Exposures to the financials and consumer discretionary sectors, as well as in Italy and Taiwan, detracted from relative returns. As of month end, the Fund was overweight Italy and underweight Japan.

The holding that contributed the most to the Fund’s return during the month was Beijing Chunlizhengda Medical Instruments Co., Ltd. Class H. (ticker: 1858-HK). Beijing Chunlizhengda Medical Instruments is a leading manufacturer of implants for joint replacements (hip and knee) and instruments used in spinal and trauma surgery. The company is benefitting from secular growth, an ageing population, increasing medical coverage and rising incomes in China, driving 50% revenue growth over the medium term. They are considered a leader in the space locally in China and the Manager expects the growth runway to last for several years.

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 February 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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