Monthly Report October 2020


Return  volatility

All returns are in NZ$ 31 Oct 20 3 months 12 months Since
inception pai

inception pai

Aspiring Fund

1.26% 3.70%  6.48%   10.75%

New Zealand Equitiesii

2.87% 3.04% 12.02%     9.09%

Australian Equitiesiii

0.03% 0.91% -7.53%    5.63%

World Equitiesiv

-3.05% 0.63%  1.16%    6.19%
i February 2006, ii NZX50 Gross, iii ASX All Ordinaries Accumulated, iv MSCI World Equities Total Return

Unit Price


Asset Allocation

New Zealand Equities


Australian Equities


International Equities




Total Cash


Short Equities

Net Fund Value $415.7m

The Fund's main direct currency exposures at month end were - NZD 52%
, AUD 16% , USD 23%

The Fund returned 1.26% in October.

Global markets whipsawed. MSCI World Equities were up 4.7% at highs during the month, but after a 7.4% fall closed down 4%.

While elevated volatility continues, overall, markets have proved to be incredibly resilient when considering the dramatic spike in COVID cases globally, the return to lockdown in large parts of Europe, and heightened political and economic uncertainty.

Since August, World Equities are flat despite COVID cases in Europe and the US being up over 6x and 88% respectively, and significantly higher than the first wave of the pandemic. We believe this is in part attributed to ongoing optimism around the availability of an effective vaccine next year, but moreover, the influence of TINA – the lure of equity yields in the absence of yield at the bank and in fixed interest.

Australasian markets outperformed global indices. The average stock in NZ was up 3.7%, and despite Resources being down -1.3%, Australian Equities were up 2.1%, driven by a +6% move in Financials. Australian Banks were buoyed by the Australian Federal Budget delivering much larger than expected ongoing extraordinary fiscal support.

The NZ Portfolio had a particularly strong month, up 5.5%.

The main highlight in the NZ Equities portfolio was positive news from core holding, and top Fund position, Infratil. At its Investor Day, Infratil’s largest investment holding, Canberra Data Centres, revealed owned development capacity now exceeds 430 MW. This is a material uplift from the ~280 MW included in the company’s March-20 independent valuation, and our prior valuation assumption of ~350 MW. Management reiterated impressive leasing economics, with no evidence of pricing contraction and lease terms of over 15 years (providing multiple times pay-back of data-centre construction cost). We expect Infratil to guide to a material valuation upgrade for Canberra Data Centres at their Interim Result announcement in November.

Later in the month, Infratil announced an offer to acquire up to 60% of Australian diagnostic imaging practice QScan for ~A$330m. We view the offer price as fair and are encouraged to see Infratil deploy capital in an industry that has scope for further investment. Infratil’s share price was up 8.6% in October and with underlying valuation upgrades, we still view the stock as heavily discounted against observable comparable company valuations.

Positive company updates were also a feature for NZ Freight investments, Mainfreight (+17.2%) and Freightways (+8.4%). It is pleasing to see such strong operational and management execution, with year to date forward earnings expectations for Mainfreight up 17%, and up 3% for Freightways.

We attended the Mainfreight investor day in Tauranga where the company highlighted strong momentum in its key NZ and Australian markets leading to group revenue growth of +7% and profit growth of +23% year to date. The company has clearly navigated a challenging environment well, taking market share as less able competitors have struggled to cope with disrupted supply chains.

Freightways also provided a strong update with double digit parcel volume growth and importantly margin improvement in the ‘business to consumer’ segment, rewarding their ‘pricing for effort’ strategy.

Another key winner was Contact (+11%). Buying by a Global Clean Energy ETF for its scheduled semi-annual reset, and speculation Contact would enter the World MSCI Index (and see a wave of passive buying) saw the shares trade up 23% during the month. We have seen this show before, we took profits.

The Australian Portfolio had a mildly positive month, with Telstra (-3.6%) weighing on the performance. NZ Telco Spark (-4.5%) also traded down during the month. In addition to Spark and Telstra, the Fund’s telco exposure includes Vodafone through our Infratil holding. Given the uncertain economic outlook and low interest rate environment, we are attracted to the high dividend yields and defensive cashflows of these businesses.

We had a small win in respirator protection equipment company CleanSpace, which IPO’d during the month and was up a remarkable 68% on its first day. COVID has had a significant impact on the company which had largely sold equipment to the industrial workspace. Their number of Hospital customers have grown from 20 only one year ago to over 500 today. Revenues from its Health Division are expected to grow by over 20x and see total group sales double. CleanSpace is a good example of how very unique small company investment opportunities can emerge in Australia.

The International Portfolio had a mixed month with our Credit Card positions (Mastercard -14.7% and Visa -9.1%) struggling following results which were clearly impacted by the coronavirus. Mastercard was hit by a 30% decline in cross-border volumes. Both companies are leveraged to a COVID-recovery and continuing digitalisation of the US wallet.

Global pharmaceutical company Sanofi’s (-9.7%) selloff was despite an earnings guidance upgrade to 7-8% growth, comfortably above consensus estimates. We remain happy holders of the name with its defensive earnings stream, bullet proof balance sheet and undemanding valuation, trading at a ~20% discount to peers on a sub-13x price to earnings ratio.

The key winners in the international portfolio were China tech positions Tencent (15.5%) and Alibaba (6.4%), and Google (10.3%). China equities continued their strong run in October (+4.8) and are up over 25% at the time of writing, underpinned by a growing economy and still large valuation discount relative to offshore peers.

While the Nasdaq was down -2.3% in October, with a host of large cap momentum stocks oscillating since July, it is worth commenting on the strength of their results.

Google smashed expectations with 14% revenue growth, a strong rebound from the first revenue decline in Google’s history in the prior quarter when ad spend was hit in the early days of the pandemic. Advertising spend increased 10% and the burgeoning Google Cloud business grew 45%. 

Microsoft (-3.7%) beat expectations with 12% revenue growth, including 48% growth in its cloud computing servicing business Azure.

Amazon (-3.6%) reported strong 3rd quarter growth with its AWS Cloud business increasing revenue by 29%, and its North American Online Ecommerce business growing sales by 43%. What makes the latter even more impressive is Amazon Prime day was not in Q3 this year, adjusting for this the underlying growth rate is likely to be closer to 50%. These are big growth rates on big numbers, and Amazon is now a US$400 billion revenue business.

While markets remain uncomfortably hard to predict short-term, elevated volatility continues to present investment (and profit-taking) opportunities for the Fund and reinforces our strategy to maintain a high level of diversification.

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Freeport McMoRan


Disclaimer :  The information contained in this newsletter reflects the views and opinions of the issuer of the Aspiring Fund, Aspiring Asset Management Limited.  The content of this newsletter is not intended as a substitute for specific professional advice on investments, financial planning or any other matter, and does not take into account any particular investor’s objectives, financial situation or needs.  Investors should seek the advice of an authorised financial adviser before making any investment decisions. Although the information provided in the newsletter is, to the best of our knowledge and belief correct, Aspiring Asset Management, its directors, employees and related parties accept no liability or responsibility for any loss, damage, claim or expense suffered or incurred by any party as a result of reliance on the information provided and opinions expressed in this newsletter, except as required by law.  Please also note that past performance is not necessarily an indication of future returns.

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