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Munro Global Growth Fund Monthly Report – November 2019

The Munro Global Growth Fund returned 4.6% for November, comprising a return of 3.7% from equities and 0.9% from currency. The MSCI AC World Index (AUD) returned 4.3% (2.9% from equities and 1.5% from currency).

Munro Global Growth Fund Monthly Report – November 2019

Equity markets globally were higher with the US S&P 500 4.3%, the Europe STOXX 600 2.6%, Japan’s TOPIX 1.5% and the Hang Seng the laggard, down 1.1%.

The rotation from ‘growth’ to ‘value’ stocks finally subsided in November, as markets began to reward all stocks for what is shaping up as an improved outlook as we enter 2020. During the month, we increased the net exposure above 90% to benefit from the return to favour of some of the Fund’s Cloud Computing, Digital Payments and Internet Disruption positions after a lengthy hiatus.

From a stock attribution perspective, positive contributions came from programmatic advertiser, the Trade Desk (see page 2) and our Digital Enterprise and High Performance Computing Areas of Interest. Alibaba’s (see page 2) recent dual listing also provided an impetus for a strong month.

On currencies, the Fund remained roughly 50/50 in USD/AUD, meaning it did not fully benefit from the depreciation of the AUD over the month, gaining 88bps versus the index’s 149bps.

With the Fed currently on hold, growth in the “not as bad as feared” category and stimulus flowing through into the economy, the tailwinds suggest a positive end to the year as investors look to 2020 with optimism that earnings can improve from depressed levels.

A potential sticking point for a continued rally is the scheduled US tariff hikes on Chinese imports due to go into effect on 15 December. As has been the case for much of 2019, the outcome here is binary. While we currently remain bullish on markets short term given neither side wants to push their economies into recession, we have taken the opportunity to deploy some put option hedging should there be a breakdown in talks. Outside of this, the risks to equities markets largely remain around interest rates. The ideal backdrop for growth equities would remain a not too hot, not too cold, economic growth backdrop where interest rate moves stay benign.

While many stocks and indices are currently making new record highs, much of our portfolio remains below previous high points, despite earnings outlooks that are largely unchanged. Since share prices should ultimately follow earnings over the long run, we look to the new year with renewed optimism and would look for some catch up in key Fund holdings over the months ahead.

 

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