VAM Funds (Lux) Commentaries

October 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 health care and financials sectors. Holdings in the utilities and communication services sectors detracted from relative returns. At month end, the Fund was overweight the financials, communication services and utilities sectors, and underweight in the health care sector.

The holding that contributed the most to the Fund’s return during the month was MyoKardia, Inc. (ticker: MYOK-US). Myokardia is a development stage precision cardiology company. Early in the month of October, Bristol Myers and Myokardia announced that they had reached an agreement under which Bristol Myers will acquire Myokardia for $225 per share. The company contributed the most as a result of the announcement.

The holding that detracted the most from the Fund’s return during the month was Cytokinetics, Incorporated (Ticker: CYTK). Cytokinetics is a development stage drug company focused on muscle pathophysiology. During October, Cytokinetics and their partner Amgen announced the results for a phase 3 study in patients with a form of heart failure. The study hit its primary endpoint of reduction in hospitalisation and mortality, but the benefit was driven by reduction in hospitalisation and not mortality, so shares of Cytokinetics sold off on the news.

VAM US Small Cap Growth Fund

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

The holding that detracted the most from the Fund’s return during the month was Sunnova Energy International Inc (ticker: NOVA-US). Sunnova is an installer of residential solar panels for over 80,000 customers in 20 states. The stock had run up strongly in the prior months due to industry consolidation of the top solar installers and in anticipation of a Democratic sweep in the US elections in November. The stock detracted in October after the closing of the merger between top solar installers created some arbitrage selling, and increased uncertainty over the US election caused selling in many alternative energy stocks.

The holding that contributed the most to the Fund’s return during the month was MyoKardia, Inc. (ticker: MYOK-US). Myokardia is a development stage precision cardiology company. Early in the month of October, Bristol Myers and Myokardia announced that they had reached an agreement under which Bristol Myers will acquire Myokardia for $225 per share. The company contributed the most as a result of the announcement.

VAM US Mid Cap Growth Fund

The VAM Funds (Lux) – US Mid Cap Growth Fund performance benefitted from holdings in the communication services and real estate sectors. At month end, the Fund was overweight the communication services sector and underweight in the real estate, utilities and materials sectors.

The holding that detracted the most from the Fund’s return during the month was Caesars Entertainment Inc (Ticker: CZR). Ceasars is the largest casino-entertainment company in the US. The stock detracted in October as the market grew more concerned about a new wave of COVID-19 cases potentially leading to another round of more stringent operating restrictions and shutdowns.

The holding that contributed the most to the Fund’s return during the month was MyoKardia, Inc. (ticker: MYOK-US). Myokardia is a development stage precision cardiology company. Early in the month of October, Bristol Myers and Myokardia announced that they had reached an agreement under which Bristol Myers will acquire Myokardia for $225 per share. The company contributed the most as a result of the announcement.

VAM US Large Cap Growth Fund

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

The holding that detracted the most from the Fund’s return during the month was Apple Inc. (ticker: AAPL-US). Apple, Inc. engages in the design, manufacture and sale of smartphones, personal computers, tablets, wearables and accessories, and other variety of related services. Although the company reported earnings per share ahead of consensus estimates, the company continued not to provide any guidance causing questions surrounding iPhone 12 demand as well as questions of a soft quarter in China.

The holding that contributed the most to the Fund’s return during the month was Thermo Fisher Scientific, Inc. (ticker: TMO-US). Thermo Fisher Scientific, Inc. engages in the provision of analytical instruments, equipment, reagents and consumables, software and services for research, analysis, discovery and diagnostics. During the past month, the company received approval for two new SAR-CoV-2 antibody tests. The company also announce earnings above estimates and guided higher.

VAM Emerging Markets Growth Fund

The VAM Funds (Lux) – Emerging Markets Growth Fund performance was aided by holdings in the health care and industrials sectors, as well as in Taiwan and India. Exposures to information technology and consumer discretionary sectors, as well as in the United States and China, detracted from relative returns. At month end, the Fund was overweight the United States and underweight Taiwan.

The holding that contributed the most to the Fund’s return during the month was Tencent Holdings Ltd. (ticker: 700-HK). Tencent, a digital platform and gaming company. The company is expected to report strong third-quarter results driven by mobile gaming and social media ads. Additionally, the Street has increased its focus on Tencent’s fintech business in light of peer Ant Group’s upcoming IPO. The rising valuation of Ant Group is likely driving the Street to place a higher value on Tencent’s fintech business.

The holding that detracted the most from the Fund’s return during the month was Reliance Industries Limited (ticker: 500325-IN). Reliance Industries underperformed as investors question the pace of recovery in Reliance’s refining and retail businesses. Also, the company’s proposed acquisition of Future Retail, which would bolster its market presence and scale, was contested in court by Amazon.

VAM World Growth Fund

Exposures in the consumer discretionary and utilities sectors, as well as in Germany and Jersey, detracted from relative returns. Performance was aided by exposures in the health care and industrials sectors, as well as in Japan and China. At month end, the Fund was overweight Germany and underweight Japan.

The holding that detracted the most from the Fund’s return during the month was DraftKings Inc Class A (ticker: DKNG-US). DraftKings is the leading digital sports entertainment and gaming company providing online and retail sports wagering offerings for professional and collegiate athletics, online daily fantasy and casino games. In the month of September, which is the start of NFL football and college football in the US, and the announcement of an exclusive deal with ESPN to provide daily fantasy sports wagering was received positively by the markets. More states in the US continue to legalise online and sports gambling which should provide a long tailwind for growth for the company. This was the biggest contributor to returns last month and valuations had gotten very stretched. Since then, the company did a secondary offering and there were some insider sales by key managers, which led to a normal correction of the stock from an elevated valuation.

The holding that contributed the most to the Fund’s return during the month was MyoKardia, Inc. (ticker: MYOK-US). Myokardia is a development stage precision cardiology company. Early in the month of October, Bristol Myers and Myokardia announced that they had reached an agreement under which Bristol Myers will acquire Myokardia for $225 per share. The company contributed the most as a result of the announcement.

VAM International Real Estate Equity Fund

The VAM Funds (Lux) – International Real Estate Equity Fund performance was aided by exposures in Japan and Singapore. Exposures in Hong Kong and United Arab Emirates detracted from relative returns. At month end, the Fund was overweight Japan and Hong Kong.

The holding that contributed the most to the Fund’s return during the month was KWG Living Group Holdings Limited (ticker: 3913-HK). KWG Group Holdings Limited is an investment company which engages in the development of real estate and commercial properties. The company continues to improve net profit and earnings despite a cooling environment.

The holding that detracted the most from the Fund’s return during the month was China Resources Land Limited (ticker: 1109-HK). China Resources Land Limited is an investment holding company which engages in the investment and management of real estate properties. The company had a pull-back in share price; however, the company continues to display strong physical market fundamentals with full year sales targets to be met.

VAM International Opportunities Fund

The VAM Funds (Lux) – International Opportunities Fund performance was aided by holdings in the industrials and financials sectors, as well as in the United Kingdom and Sweden. Exposures to the communication services and consumer staples sectors, as well as in Australia and Switzerland, detracted from relative returns. At month end, the Fund was overweight the United Kingdom and underweight Australia.

The holding that contributed the most to the Fund’s return during the month was Weir Group PLC (ticker: WEIR-GB). Weir Group is a UK-based leading provider of engineering solutions (both products and services) to the mining, energy and power markets. Their products range from pumps and valves for oil and gas to compressors and turbines for wind energy and mining markets. They have operations globally, but their main focus is on mining and alternative energy and power markets. The oil and gas business has not surprisingly been a substantial drag on the company’s top and bottom line for several years. In early October, they decided to sell this business, which the market viewed positively as they will now focus on more profitable and sustainable business lines moving forward. In addition, they provided a mid-quarter trading update and guided for a stronger outlook looking into 2021, particularly now that the oil and gas business has been divested.

The holding that detracted the most from the Fund’s return during the month was HORNBACH Holding AG & Co. KGaA (ticker: HBH-DE). Hornbach is a leading supplier and retailer of building materials and garden supplies in Germany, Austria, Luxembourg and the Netherlands. Similar to Home Depot and Lowes in the US, they have been benefitting from an increasing desire of “do-it-yourself” home improvement projects this year as more people are working from home and looking to increase their stay-at-home amenities. There was no company-specific news to cause a drawdown in the stock, rather it has been a very strong performer over the past nine months and was merely giving back some short-term gains. The Manager continues to hold its position and continues to like the company’s position and outlook as it looks into 2021.

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 October 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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