Summer New Zealand Equities

Summer New Zealand Equities fund performance summary as at 31 May 2022.

Fund at a glance

Unit price  (as at 31 May 2022): $1.5994

Date the fund started: 19 September 2016

For information on fees, see our Fees page.

For more information on the Summer New Zealand Equities fund, read the latest quarterly fund update and the product disclosure statement

Fund objective and strategy

See the New Zealand Equities page for the Summary of investment objective and strategy.

Fund returns 

PIR Total since inception (annualised) 1 Month 3 Month 1 Year 3 Years^
28% 8.66% -4.79% -4.82% -3.84% 5.26%
17.50% 9.00% -4.79% -4.72% -3.58% 5.53%
10.50% 9.23% -4.78% -4.65% -3.40% 5.71%

  ^ Annualised

Fund returns are calculated net of fund charges, trading expenses and accrued tax for a New Zealand resident individual paying tax at the Prescribed Investor Rate identified above. 

Top 10 investments

  Asset name % of fund net assets
1 Fisher & Paykel Healthcare Corporation Limited 8.92%
2 Spark New Zealand Limited 8.33%
3 Ebos Group Limited 5.81%
4 Contact Energy Limited 5.73%
5 Auckland International Airport Limited 5.01%
6 Fletcher Building Limited 4.73%
7 Infratil Limited 4.53%
8 SKYCITY Entertainment Group Limited 4.52%
9 Mainfreight Limited 4.07%
10 Meridian Energy Limited 3.85%

The top 10 investments make up 55.50% of the fund.

Manager's Commentary

Market Commentary 

The New Zealand Equity market delivered another very soft month of returns in May. In fact, only nine of the fifty stocks in the market index delivered positive returns. Again, it was not a case of what has happened, with most company updates delivering in line or slightly better results, but rather it is a case of what is happening to the outlook. Inflation and interest rates are driving cuts to future economic growth forecasts the world over.

Four stocks declined by more than 20% this month – Pacific Edge Biotechnology, Eroad, Air NZ and Serko. All of them having very low current earnings (or are loss making) but offer the promise of significant growth in profits in the future either as borders reopen or their technology is adopted in international markets. As of the 2nd of May, we held a small position in Serko, and no shares were held in the other three. We added a small position in Air NZ later in the month as the price we had to pay to access the future growth fell.

Pushpay again lead the pack in terms of stock returns in the market index this month. Whilst there was no definitive news on the announced expressions of interest last month, it is clear that one of the largest shareholders wants to see something happen. At the other end of the table was Serko, which delivered a slightly disappointing result and a muted outlook. Despite being in an attractive space and exposed to border re-openings, the pace of growth revealed in their update disappointed. 

Portfolio Performance

Summer New Zealand Equities delivered a return of -4.79% over the May month and for the 12 month period to date delivered a return of -3.84%.

Our underweights in Air NZ, along with our overweight’s in Channel Infrastructure and Sky TV were the best contributors to relative performance. Our underweight in Ryman Healthcare, and overweight’s in Sky City Entertainment and Kathmandu, were the biggest detractors to relative performance.

Outlook

We think risks to the economy and company earnings are building. The strong employment backdrop is the last powerful driver of the economy that has not started to weaken. Despite the very strong employment position, consumer confidence, as measured by surveys, is at a very low level.

The market is now craving earnings certainty and has priced the market along those lines. Companies with defensive and predictable earnings continue to trade at full valuations in our view, resisting the negative impact much higher interest rates should be having on their valuations. Companies typically exposed to cyclical economic growth which have built strong profitability through the pandemic disruptions are beginning to price in major falls in future earnings as economic growth stalls.

We continue to be patient with our exposures to border re-openings - primarily Sky City and Kathmandu. Late in the month there were suggestions of take-over activity around Sky TV and Comvita, two key overweight positions. Both appear cheap on near term cash flows in our view, and we await further developments with interest.

 

 

 

 

This is not a recommendation to buy or sell any financial product and does not take your personal circumstances into account. All opinions reflect our judgement on the date of communication and may change without notice. Past performance is not a reliable guide to future performance. We recommend you take financial advice before making investment decisions. We have prepared this web page in good faith based on information obtained from other sources, but we do not guarantee the accuracy of that information. We do not make any representation or warranty (express or implied) that this web page is accurate, complete, or current and to the maximum extent permitted by law disclaim any liability for loss which may be incurred by any person relying on this web page.