VAM Funds (Lux) Commentaries

December 2018

VAM US Micro Cap Growth Fund

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

 

The holding that contributed most to the Fund’s return during the month was Fluidigm Corporation (ticker: FLDM). The company manufactures and markets innovative technologies and tools for life sciences research. Its share price rose after strong earnings results as well as a repositioning that investors reacted to favorably. Revenue grew by 17%, driven mainly by sale of instruments while sales grew approximately 20% annually. The positioning shift should benefit from a paradigm shift in immuneoncology research as the company pivots to focus on its Genomics group.

 

The holding that detracted most from the Fund’s return during the month was Malibu Boats Inc. (ticker: MBUU). The company designs, manufactures, and markets recreational powerboats. Its share price fell to no material events. Management reiterated strong guidance and a clear strategy toward margin and sales upside in the next 12-18 months. Colbalt dealers in the Midwest have already asked to carry the broader brand for cross-selling potential. Additionally, the company is uniquely protected from the tariff issues that hang over markets as its overseas expansion plans are mostly in Australia and the EU. The Manager continues to hold this name in the portfolio.

VAM US Small Cap Growth Fund

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

 

The holding that contributed most to the Fund’s return during the month was SI-BONE, Inc. (ticker: SIBN). The company develops invasive surgical implant systems. Its share price rose after reporting strong third quarter performance. Revenue of $13 million, a 15% growth year over year, came right at the top of the expected range. Growth was driven by domestic sales results, which grew 16% year over year while international revenues remained flat. The company’s plans for continued sales expansion, continued coverage policy wins, and clearance for a new sacro-pelvic product all bode well for the company’s near and medium term.

 

The holding that detracted most from the Fund’s return during the month was Canada Goose Holdings, Inc. (ticker: GOOS). The company designs, manufactures, distributes and retails outerwear for men, women and children. Its share price fell due to a social media campaign to boycott the company in China after the arrest of Huawei’s CFO in Canada. The company delayed opening its flagship store in Beijing in response. However, in the long term, expansion plans into China and Asia poses a large opportunity and sales growth of more than 30% for the last four years and revenue increase of 34% are encouraging. The Manager continues to hold this name in the portfolio as it monitor its movements.

VAM US Mid Cap Growth Fund

The VAM Funds (Lux) – US Mid Cap Growth Fund performance benefited 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 consumer discretionary sector and underweight the health care sector.

 

The holding that contributed most to the Fund’s return during the month was Global Blood Therapeutics Inc. (ticker: GBT). The clinical-stage biopharmaceutical company engages in the discovery, development and commercialization of novel therapeutics to treat blood-based disorders. Its share price rose on strong clinical data. Two ongoing trials in adults and adolescents of Voxelotor to treat sickle cell anemia reported strong results demonstrating that the drug can elicit durable hematological improvement in a very clean safety profile. Some analysts believe these results may also make a strong case for accelerated approval.

 

The holding that detracted most from the Fund’s return during the month was Vail Resorts, Inc. (ticker: MTN). The company engages in the operation of mountain resorts and other properties. Its share price fell due to decelerating headline pass sales and renewal growth, which could have been driven by poor weather conditions. However, average snowfall is higher than at this same time last year while snowfall in the last few weeks have doubled from last year in some regions. 59% of trails are open compared to 19% last year. Analysts have expressed confidence in a guidance upgrade with early season metrics in January 2019. The Manager continues to hold this name in the portfolio.

VAM US Large Cap Growth Fund

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

 

The holding that contributed the most to the Fund’s return during the month was CF Industries Holdings, Inc. (ticker: CF). The company manufactures and distributes nitrogen fertilizer. Over the past few months, the company’s share price has traded with GDP sentiment which is unusual. With concerns about China and gas prices, analysts do not expect this to continue. However, solid demand in nitrogen should keep volumes high for the company, even if the cost curve flattens. Although there are some price targets that have been lowered, mostly due to trade war concerns, the company remains a strong free cash flow generator.

 

The holding that detracted most from the Fund’s return during the month was Apple Inc. (ticker: AAPL). The company designs, manufactures, and markets mobile communication, media devices, and personal computers. Its share price fell due to concerns surrounding iPhone sales. A combination of issues surrounding the high price of the new iPhone and rising China risk due to trade wars and weak and falling demand in India along with rising interest rates all drag on the company. However, service growth continues and tariff mitigation strategies could negate some of the current concerns around production and demand in China. The Manager continues to hold this name in the portfolio.

VAM Emerging Markets Growth Fund

The VAM Funds (Lux) – Emerging Markets Growth Fund performance was aided by holdings in the energy and health care sectors, as well as in Hong Kong and Brazil. Exposures to communication services and consumer discretionary, as well as in Taiwan and Argentina, detracted from relative returns. As of month end, the Fund was overweight India and underweight China.

 

The holding that contributed most to the Fund’s return during the month was Anglo American Platinum Limited (ticker: AMS-ZA). The South Africa-based company engages in the mining, smelting, refining, and supply of platinum group metals. With China’s national aims to cut carbon emissions, hydrogen moves to the forefront of the nation’s energy development. To produce energy this way, proton exchange membrane fuel cells are used, which require platinum catalysts in the anode and cathode. Platinum is the only metal that can withstand the conditions inside such fuel cells. With expected demand to increase as the country transitions, the company seems well-positioned to take advantage of the opportunity.

 

The holding that detracted the most from the Fund’s return during the month was Alibaba Holding Ltd. (ticker: BABA). The China-based company provides online and mobile marketplaces in retail and the wholesale trade. Its shares fell as online sales of physical goods slowed to approximately 18% in November after it was at 24% in September. Overall, consumer goods sales slowed to 8.1% from 8.6% in October. On the positive side, the company remains the dominant player as well as displays strong growth in the cloud space. The Manager continues to hold this name in the portfolio.

VAM World Growth Fund

The VAM Funds (Lux) – World Growth Fund performance was aided by exposures in the financials and information technology sectors, as well as in Brazil and the Isle of Man. Exposures in industrials and materials, as well as in Canada and the Netherlands, detracted from relative returns. As of month end, the Fund was overweight Brazil and underweight Japan.

 

The holding that contributed most to the Fund’s return during the month was Lojas Renner S.A. (ticker: LREN3-BR). The Brazil-based company engages in the retail of clothing, sports equipment, accessories and cosmetics in the domestic market. Despite economic and political uncertainty, the company has grown to be the largest fashion retailer in Brazil. Steady earnings per share growth and steady pretax margin at 13% and return on equity of 25% against the backdrop of the Brazilian markets makes this stock appealing to investors.

 

The holding that detracted most from the Fund’s return during the month was Canada Goose Holdings, Inc. (ticker: GOOS). The Canada-based company designs, manufactures, distributes and retails outerwear for men, women and children. Its share price fell due to a social media campaign to boycott the company in China after the arrest of Huawei’s CFO in Canada. The company delayed opening its flagship store in Beijing in response. However, in the long term, expansion plans into China and Asia poses a large opportunity and sales growth of more than 30% for the last four years and revenue increase of 34% are encouraging. The Manager continues to hold this name in the portfolio as it monitors its movements.

VAM International Real Estate Equity Fund

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

 

The holding that contributed most to the Fund’s return during the month was Cyrela Brazil Realty SA Empreendimentos e Participacoes (ticker: CYRE3-BR). The Brazil-based company develops and constructs residential properties. Its share price rose in concert with the overall Brazilian market. Despite disappointing third quarter results, operating performance continues to improve and the technical construction issues and repair costs should have been accounted for in the third quarter.

 

The holding that detracted the most from the Fund’s return during the month was Unibail-Rodamco-Westfield (ticker: URW-NL). The Netherlands-based company develops and operates flagship shopping destinations. The company’s financial structure is weak, with a debt/equity ratio equal to 0.7 and a debt to earnings a 9.9. However, despite some weakness, it has a steady earnings outlook and decent fundamentals. The Manager continues to hold this name in the portfolio.

VAM International Opportunities Fund

The VAM Funds (Lux) – International Opportunities Fund performance was aided by holdings in the health care and consumer staples sectors, as well as in Germany and Brazil. Exposures to the consumer discretionary and energy sectors, as well as in Canada and India, detracted from relative returns. As of month end, the Fund was overweight Canada and underweight Japan.

 

The holding that contributed most to the Fund’s return during the month was Kirkland Lake Gold Ltd. (ticker: KL-CA). The Canada-based company engages in mining, development, and exploration of gold properties. Its share price rose after significant high-grade results from exploration drilling was announced at Swan Zone in Fosterville mine. Results confirmed a down-dip extent of 75 meters wide, 100 meter step-out down plunge. Street analysts expect that the company could deliver a much larger reserve than expected. Consensus price estimates have increased.

 

The holding that detracted most from the Fund’s return during the month was Canada Goose Holdings, Inc. (ticker: GOOS). The Canada-based company designs, manufactures, distributes and retails outerwear for men, women and children. Its share price fell due to a social media campaign to boycott the company in China after the arrest of Huawei’s CFO in Canada. The company delayed opening its flagship store in Beijing in response. However, in the long term, expansion plans into China and Asia poses a large opportunity and sales growth of more than 30% for the last four years and revenue increase of 34% are encouraging. The Manager continues to hold this name in the portfolio as it monitors its movements.