VAM Funds (Lux) Commentaries

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

The holding that contributed the most to the Fund’s return during the month was SiTime Corporation (ticker: SITM). SiTime is a micro-electromechanical system (MEMS) based silicon timing solutions manufacturer. SiTime pre-announced third quarter 2020 earnings above consensus expectations, led by design win/shipments into a leading 5G smartphone model which is planned to be launched this fall 2020. The Manager made no changes to its position as it believes this design win will lead to continued upward revisions to consensus earnings estimates in future periods.

The holding that detracted the most from the Fund’s return during the month was Fox Factory Holding Corp. (ticker: FOXF). Fox Factory designs and manufactures performance-defining ride dynamics products for outdoor vehicles and bicycles. After a substantial increase off the April low, the stock pulled back in September and detracted as investor concerns mounted about the sustainability of demand for outdoor recreation. The Manager did not adjust the position.

VAM US Small Cap Growth Fund

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

The holding that contributed the most to the Fund’s return during the month was Invitae Corp. (ticker: NVTA). Invitae is a commercial stage molecule diagnostics company that commercialises tests in women’s and pre-natal health, genetic diseases and oncology. In June, Invitae announced the acquisition of ArcherDx, a molecule diagnostics company in a highly sought after complementary market (somatic testing in oncology) that not only expands Invitae’s total addressable market (TAM) dramatically within its existing call-point, but also increases its scale, which Invitae plans to use to continue to drive up barriers to competitive entry. As a result, Invitae estimates were revised upward and its multiple expanded throughout the third quarter. The Manager maintains a significant position in Invitae due to the massive potential that molecule diagnostics still has to dramatically improve health care as well as Invitae’s strong and strengthening position as a leader in it.

The holding that detracted the most from the Fund’s return during the month was Fox Factory Holding Corp. (ticker: FOXF). Fox Factory designs and manufactures performance-defining ride dynamics products for outdoor vehicles and bicycles. After a substantial increase off the April low, the stock pulled back in September and detracted as investor concerns mounted about the sustainability of demand for outdoor recreation. The Manager did not adjust the position.

VAM US Mid Cap Growth Fund

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

The holding that contributed the most to the Fund’s return during the month was Snowflake, Inc. Class A (ticker: SNOW). Snowflake is a cloud-based data warehousing vendor. Snowflake recently completed an Initial public offering (IPO) and doubled on the first day of trading. The Manager had participated in the IPO and received a material allocation at the IPO price. The Manager made no changes to its position as it believes the company is in early stages of capturing market share in a very large and growing TAM.

The holding that detracted the most from the Fund’s return during the month was Fox Factory Holding Corp. (ticker: FOXF). Fox Factory designs and manufactures performance-defining ride dynamics products for outdoor vehicles and bicycles. After a substantial increase off the April low, the stock pulled back in September and detracted as investor concerns mounted about the sustainability of demand for outdoor recreation. The Manager did not adjust the position.

VAM US Large Cap Growth Fund

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

The holding that contributed the most to the Fund’s return during the month was Lennar Corporation Class B (ticker: LEN.B). Lennar Corp. is a homebuilder company which engages in the provision of real estate related financial and investment management services. The company reported earnings that surprised analyst expectations and revised guidance upward. The Manager noted the company’s strategic place between pace and price, upwards revised guidance and near-term margin opportunities as incremental positives in the quarter.

The holding that detracted the most from 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. While there was no negative company news, the company did trade along with the rest of its group, having the usual sensitivity to macro-related events.

VAM Emerging Markets Growth Fund

Exposures to information technology and communication services sectors, as well as in South Korea and Taiwan, detracted from relative returns. Performance was aided by holdings in the health care and energy sectors, as well as in the United States and Argentina. At month end, the Fund was overweight the United States and underweight South Korea.

The holding that detracted the most from the Fund’s return during the month was Tencent Holdings Ltd. (ticker: 700-HK). Tencent, a digital platform and gaming company, was drawn into politics as the US threatened to ban its app ‘WeChat’ on national security grounds. US revenue accounts for less than 2% of group revenue, but the headlines acted as an overhang on the shares, nonetheless.

The holding that contributed the most to the Fund’s return during the month was Samsung Electronics Co., Ltd. (ticker: 005930-KR). Samsung Electronics is a diversified technology company that sells semiconductors, display panels, consumer electronics and appliances. The stock outperformed in September as the company indicated that it expected to gain share in the smartphone market. Additionally, they announced a multi-billion Dollar deal with Verizon to provide 5G network equipment.

VAM World Growth Fund

The VAM Funds (Lux) – World Growth Fund performance was aided by exposures in the consumer discretionary and information technology sectors, as well as in the United States and Japan. Exposures in the materials and utilities sectors, as well as in Canada and Sweden, detracted from relative returns. At month end, the Fund was underweight the United States and Canada.

The holding that contributed the most to the Fund’s return during the month was DraftKings Inc Class A (ticker: DKNG). DraftKings is the leading digital sports entertainment and gaming company. The company provides online and retail sports wagering offerings for professional and collegiate athletics, online daily fantasy and casino games. In the month of September, 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 were positively received by the markets. As more and more states in the US legalise online gambling and sports wagering, the Manager expects a long growth runway ahead for the company.

The holding that detracted the most from the Fund’s return during the month was AZEK Company Inc (ticker: AZEK). Azek is the second largest provider of composite outdoor decking material and design consulting in the US behind the leader, Trex. Both companies have been benefitting from a switch by existing homeowners, as well as new construction by homebuilders going for more sustainable and higher quality, longer lasting materials in deck building versus traditional wood decks. The stock underperformed during the month as expectations went to an unrealistic high level regarding quarterly results. The market was expecting a very strong result and, while results were better than expected, they were not as strong as many had hoped. The Manager believes it is short-term noise and high expectations, and has made no change to its position as it still believes in the long-term structural growth opportunity.

VAM International Real Estate Equity Fund

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

The holding that contributed the most to the Fund’s return during the month was Wallenstam AB Class B (ticker: WALL.B-SE). Wallenstam AB builds, develops and buys properties in metropolitan areas. The company reported third quarter completed transactions and construction starts. Shareholders also approved the board’s proposal to pay a dividend of 0.50 Swedish Krona/share.

The holding that detracted the most from the Fund’s return during the month was Kojamo Oyj (ticker: KOJAMO-FI). Kojamo Oyj provides real estate services. The company reported generally in-line numbers. However, the company did somewhat reduce revenue guidance. The company still continues to have a strong pipeline.

VAM International Opportunities Fund

The VAM Funds (Lux) – International Opportunities Fund performance was aided by holdings in the consumer discretionary and materials sectors, as well as in the Isle of Man and Canada. Exposures to the information technology and communication services sectors, as well as in Sweden and the United Arab Emirates, detracted from relative returns. As of month end, the Fund was overweight the Isle of Man and underweight Sweden.

The holding that contributed the most to the Fund’s return during the month was Trigano SA (ticker: TRI-FR). Trigano is a market leader in the European recreational vehicle (RV) industry (30% market share) and is heavily tilted towards France, Germany and the UK. Even pre-Coronavirus, expanded interest from a younger demographic along with increasing spend on travel had caused the RV industry to grow above the norm for the past four to five years. When COVID-19 shut down Trigano’s (and everyone else’s) plans, the stock sold off dramatically. The Manager thought this would be an incredible opportunity to invest in one of the potential beneficiaries of stay at home orders. With hotels closed and people unable/unwilling to risk flying, the RV was and is still seen as a mobile “bubble” so to speak. The Manager bought in May this year and added to its position fairly aggressively. Earnings estimates were far too low for what seemed to be a powerful positive inflection. In September, the company reported a strong third quarter revenue number and disclosed a booming order book. This sent the stock up nearly 30% in a matter of days. Since then, the Manager has seen multiple earnings revisions and analyst upgrades, confirming its thesis.

The holding that detracted the most from the Fund’s return during the month was Network International Holdings Plc (ticker: NETW-GB). Network International is the leading online payment solutions provider in many countries across Africa. Globally, the online payments space has been a very lucrative growth sector for the past few years, as merchants increasingly adopt digital online payment methods in place of more traditional cash and credit cards. While adoption is still in the early stages in most African countries, the growth rates and long-term opportunity is very compelling. Unfortunately for Network International, there have been rumours of accounting irregularities for some time, but these have been vehemently argued against by the company. A highly regarded short seller report highlighting these issues was authored during the month and the market reacted very negatively to the news. The Manager decided to exit the position with plans to revisit the stock once the negative news is disproven.

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 September 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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