VAM Funds (Lux) Commentaries

January 2024 (click here to download)

VAM US Micro Cap Growth Fund*

The Fund’s holdings assigned to the information technology and health care sectors were the largest source of positive relative returns. Holdings in the industrials and materials sectors detracted from relative returns. At month end, the Fund was overweight the industrials and consumer discretionary sectors and underweight the utilities and health care sectors.

The holding that contributed the most to the Fund’s relative returns during the month was Uranium Energy Corp (Ticker: UEC-US). Uranium Energy Corp. is a uranium miner. The company was a top contributor due to the spot price of uranium rising 11% in January, closing at $101/lb compared to December’s closing price of $91/lb. The main catalyst for the price increase was Kazatomprom (Ticker: KAP-LON), the world’s largest uranium miner, warning on 12th January that they would miss 2024 production targets due to sulfuric acid shortages and construction delays. The spot market is becoming increasingly thin with only 2.9m lbs. traded in January, down 36% on an annualised basis compared to 2023, which will make the price of uranium increasingly sensitive to rising demand.

The holding that detracted the most from the Fund’s relative returns during the month was Applied Optoelectronics, Inc. (Ticker: AAOI-US). Applied Optoelectronics, Inc. engages in the design and manufacture of optical communications products. The company was a top detractor retracing some of its price gains post earnings report in early November after which the stock doubled from $10 to over $20. The Manager made no changes to its position as the company remains well positioned to see revenue contribution from Tier-1 hyperscalers as they build out 400G/800G bandwidth networks to support AI-related workload traffic.

VAM US Small Cap Growth Fund

The Fund’s holdings assigned to the information technology and health care sectors were the largest source of positive relative returns. Holdings in the financials and real estate sectors detracted from relative returns. At month end, the Fund was overweight the industrials and information technology sectors and underweight the materials and health care sectors.

The holding that contributed the most to the Fund’s relative returns during the month was Super Micro Computer, Inc. (Ticker: SMCI-US). Super Micro Computer, Inc. engages in the distribution and manufacture of server solutions and computer products. The company was a top contributor as demand continues to exceed supply for its servers. December quarter revenue came in at the high-end of preannounced guidance, revenue of $3.6B versus $2.8B and up 73% q/q and 103% y/y. The company subsequently raised their FY24 (June-end) revenue target from $10-11B to $14.3-14.7B given improving supply and continued robust demand. Market demand for AI servers continues to grow at a rapid clip and the company remains well positioned for growth.

The holding that detracted the most from the Fund’s relative returns during the month was Applied Optoelectronics, Inc. (Ticker: AAOI-US). Applied Optoelectronics, Inc. engages in the design and manufacture of optical communications products. The company was a top detractor retracing some of its price gains post earnings report in early November after which the stock doubled from $10 to over $20. The Manager made no changes to its position as the company remains well positioned to see revenue contribution from Tier-1 hyperscalers as they build out 400G/800G bandwidth networks to support AI-related workload traffic.

VAM US Mid Cap Growth Fund

The Fund’s holdings assigned to the information technology and health care sectors were the largest source of positive relative returns. Holdings in the utilities and real estate sectors detracted from relative returns. At month end, the Fund was overweight the industrials and information technology sectors and underweight the consumer discretionary and health care sectors.

The holding that contributed the most to the Fund’s relative returns during the month was Super Micro Computer, Inc. (Ticker: SMCI-US). Super Micro Computer, Inc. engages in the distribution and manufacture of server solutions and computer products. The company was a top contributor as demand continues to exceed supply for its servers. December quarter revenue came in at the high-end of preannounced guidance, revenue of $3.6B versus $2.8B and up 73% q/q and 103% y/y. The company subsequently raised their FY24 (June-end) revenue target from $10-11B to $14.3-14.7B given improving supply and continued robust demand. Market demand for AI servers continues to grow at a rapid clip and the company remains well positioned for growth.

The holding that detracted the most from the Fund’s relative returns during the month was Duolingo, Inc. (Ticker: DUOL-US). Duolingo, Inc. is a leading global learning platform provider with the world’s most popular language-learning website and mobile application. The company was a top detractor due to underperformance driven by a negative recommendation change by a sell side analyst and concerns about tougher revenue growth comparisons looming in 2024.

VAM US Large Cap Growth Fund

The Fund’s holdings assigned to the information technology and consumer discretionary sectors were the largest source of positive relative returns. Holdings in the communication services and consumer staples sectors detracted from relative returns. At month end, the Fund was overweight the materials and financials sectors and underweight the industrials and health care sectors.

The holding that contributed the most to the Fund’s relative returns during the month was Tesla, Inc. (Ticker: TSLA-US). Tesla, Inc. engages in the design, development, manufacture, and sale of fully electric vehicles and energy generation and storage systems. The company was not owned by the portfolio as it did not meet the model’s criteria which includes a combination of valuation, revision, momentum, and duration factors.

The security that detracted the most from the Fund’s relative returns during the month was 3M Company (Ticker: MMM-US). 3M Company is a technology company, which manufactures industrial, safety, and consumer products. The company was a top detractor due to fourth quarter results and a 2024 outlook set below consensus that brought more uncertainty to 3M’s forward margin recovery.

VAM Emerging Markets Growth Fund

Performance was aided by holdings assigned to the information technology and consumer discretionary sectors, as well as in China and Taiwan. Exposures to the utilities and energy sectors, as well as Kuwait and Saudi Arabia detracted from relative returns. At month end, the Fund was and overweight Mexico and Brazil and underweight South Korea and China.

The holding that contributed the most to the Fund’s relative returns during the month was Asia Vital Components Co., Ltd. (Ticker: 3017-TW). Asia Vital Components Co., Ltd. is a supplier of thermal components such as fans and heat sinks. The company is benefitting from robust growth in AI servers and advanced processors which require more thermal component content. The company is increasing its capacity with an expansion in Vietnam to meet the rising demand.

The holding that detracted the most from the Fund’s relative returns during the month was Tencent Holdings Ltd. (Ticker: 700-HK). Tencent Holdings Ltd. is an internet and social service platform that offers social networking, music, gaming, and e-commerce related services. The company was a top detractor due to the potential slowdown in gaming revenue growth from increasing level of competition and a new regulatory policy draft.

VAM World Growth Fund

Performance was aided by holdings assigned to the information technology and consumer staples sectors, as well as in the United States and Japan. Exposures to the utilities and real estate sectors, as well as India and Germany detracted from relative returns. At month end, the Fund was overweight Japan and Mexico and underweight the United States and Australia.

The holding that contributed the most to the Fund’s relative returns during the month was Super Micro Computer, Inc. (Ticker: SMCI-US). Super Micro Computer, Inc. engages in the distribution and manufacture of server solutions and computer products. The company was a top contributor as demand continues to exceed supply for its servers. December quarter revenue came in at the high-end of preannounced guidance, revenue of $3.6B versus $2.8B and up 73% q/q and 103% y/y. The company subsequently raised their FY24 (June-end) revenue target from $10-11B to $14.3-14.7B given improving supply and continued robust demand. Market demand for AI servers continues to grow at a rapid clip and the company remains well positioned for growth.

The holding that detracted the most from the Fund’s relative returns during the month was Mobileye Global, Inc. (Ticker: MBLY-US). Mobileye Global, Inc. develops and deploys advanced driver assistance systems and autonomous driving technologies and solutions. The company was a top detractor due to first quarter and FY24 guidance which fell significantly below expectations. The Manager has exited the position until more clarity regarding its outlook emerges.

VAM International Opportunities Fund

Performance was aided by holdings assigned to the information technology and consumer staples sectors, as well as in Canda and South Korea. Exposures to the health care and consumer discretionary sectors, as well as Japan and India detracted from relative returns. At month end, the Fund was overweight Canda and Germany and underweight Taiwan and India.

The holding that contributed the most to the Fund’s relative returns during the month was Celestica Inc. (Ticker: CLS-CA). Celestica Inc. is a contract manufacturer based in Canada which has 60% of its business exposed to server and networking hardware where it has strong proprietary design capabilities. This historical leadership has made the company a preferred partner of the hyperscalers (e.g., Google, Meta). The company was a top contributor due to third quarter results and fourth quarter guidance substantially exceeding estimates.

The holding that detracted the most from the Fund’s relative returns during the month was Grifols, S.A. (Ticker: GRF-ES). Grifols, S.A. is a leading player in the plasma based therapeutic market. The company was a top detractor due to a research article being released with false information regarding the company’s accounting and financials. The company has since released a statement that they deny and reject any wrongful financials.

VAM Funds (Lux) – VAM Global Infrastructure Fund

Listed infrastructure markets corrected globally as expectations regarding interest rate cuts as early as Spring recalibrated in line with commentary from Central Banks and robust economic data. Company share prices reversed some of the gains from end of last year as the market reacted to long-term bond yields moving higher over the month.

US, UK and EU Central Banks held policy rates at current levels, indicating that interest rates have risen sufficiently to tackle inflation, although uniformly pushed back on nearterm rate cut expectations, as UK and EU economies face sticky services inflation, and the Fed contends with strong jobs data.

Two of the Fund’s Canadian listed developers and owners of renewable energy projects, Boralex and Innergex, achieved success in the latest Request for Proposals (RFP) by Hydro Quebec in Canada. Boralex secured two wind projects totalling 365 MW; Innergex secured two projects totalling 400 MW. The projects benefit from a 30-year, fully indexed offtake price for the power generated. Demand for power in Canada is expected to double by 2050 to accommodate population growth and electrification trends, and the Fund’s Canadian renewable energy holdings are strategically positioned to capitalise on this growth trajectory.

Healthpeak Properties (“PEAK”), an owner, operator, and developer of health care related real estate properties, announced a new strategic joint venture (JV) with Breakthrough Properties. The deal involves the sale of a 65% stake in PEAK’s fully leased Callan Ridge lab campus (twobuildings) located in San Diego, with PEAK retaining the remaining 35% interest. Pricing of the deal highlights the underlying demand for PEAK’s lab assets, as well as allows the Company to recycle capital back into the business to either pay down debt or use for other developments.

Scatec, alongside Standard Bank and its asset management unit Stanlib, has unveiled Lyra Energy, a renewable energy platform designed to deliver a low-risk, flexible commercial solution to South Africa’s private sector. Lyra
will offer distributed access to high-quality, affordable, and predictable utility-scale renewable energy for medium to large commercial and industrial (C&I) entities.

Infratil, an Australian-listed infrastructure investor, has announced its 48.24% data centre investment in CDC has risen A$133m to a midpoint of ~A$4.01bn from ~A$3.88bn in 3 months to December 2023. The uplift reflects the strong progress CDC has made in securing new customer contracts and the underlying demand for such digital infrastructure assets.

*Fund is currently closed to new subscriptions.

Sources: Driehaus Capital Management LLC, Foresight Capital Management, 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 January 2024. 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.

South African Investors: This is a Section 65 approved fund under the Collective Investment Schemes Control Act 45, 2002 (CISCA). Boutique Collective Investments (RF) (Pty) Ltd is the South African Representative Office for this Fund. Boutique Collective Investments (RF) (Pty) Ltd is registered and approved under the Collective Investment Schemes Control Act (No.45 of 2002).

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