In early June we discussed inflation rising to levels not seen for over 35 years. This ‘reflation’ theme lifted the prices of shares and commodities to record highs. Economically-sensitive shares were good, while bonds, big bond-like shares and those that react strongly to interest rate increases (including technology companies) were bad. Yet for the past few months, the exact opposite has been the case. Since June, investments that benefit from higher inflation made a sudden downturn following the hawkish announcement from the Federal Reserve. Gold and Bitcoin sank, the yield curve flattened aggressively (i.e., interest rates decreased), inflation expectations collapsed, the United States dollar rallied, industrial metal and agricultural commodities plunged, and financial and energy shares underperformed This reflation reversal is the key driver of our underperformance over the past few months. We are disappointed that clients have seen their portfolios reduce in value,...

The term ‘FANG Stocks’ is widely used by market commentators and analysts. The term was coined in 2013 by Jim Cramer, host of CNBC’s ‘Mad Money’. FANG is an acronym derived from the names of four prominent American technology companies; Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOG). Over time, this morphed into the acronym ‘FAAMG’ reflecting Apple’s rise to prominence as the most valuable company in the world by market cap and the reemergence of Microsoft under Satya Nadella. Netflix does not appear in this new grouping. Nearly everyone has heard of these companies and probably uses their products, at least indirectly, but we ask how much is known about these businesses, how they make their money and why they are interesting investment options. The first point to make is that the sheer size of these companies means their strength is critical to the performance and direction of the United States share market in general. The market cap of App...

In last month’s column , I outlined the changes the Government is making to the KiwiSaver scheme from December. The changes only apply to those KiwiSaver members who have not specifically chosen their manager and, as a result, have been allocated to a default fund. Of the almost $80 billion of funds invested in KiwiSaver, just over $10 billion 1 is held in default funds. The number of individuals who will be affected by this change is estimated to be 380,000, so it is not an insignificant matter. The key changes taking effect from December 1 are: 1.  Of the nine current default providers, only four have been reappointed. Those losing their default status are AMP, ANZ, ASB, Fisher Funds and Mercer 2 . 2.  The reappointed default providers are BNZ, Booster, BT Funds (Westpac) and KiwiWealth. 3.  Two new default providers have been appointed – Simplicity and Smartshares (NZX). 4.  This means the total number of default pro...

NZ Funds has had a positive view of Uber for a number of years and we have held an investment position in it since the company listed in mid-2019. The COVID-19 pandemic created a number of challenges for Uber’s business model and has delayed our initial investment thesis. However, the pandemic also created new opportunities which, in aggregate, have made our conviction regarding the upside to Uber’s share price even stronger. This week’s Investment Insight details our view of Uber and why we consider it to be an attractive investment with significant upside. Attractive business model One question we ask when we invest in growth companies like Uber is “would our daily lives be inconvenienced without this company?" For many of the best and most valuable companies in the world, the answer to this question is usually ‘yes’. For Uber, most people living in larger cities would also answer yes to that question. When Uber entered the urban transportation business, it sig...

This week, Didi Global (the world’s largest rideshare business when measured by the number of daily rides) listed on the New York Stock Exchange with a market capitalization of US$67 billion. Most people will have heard of and probably used Uber - the dominant rideshare business in New Zealand and in the United States. Fewer people, however, will be familiar with Didi Global (‘Didi’). Didi is a nine-year old company and the dominant rideshare operator in China with approximately 80% market share. In addition to China, they also operate in 16 other countries including New Zealand (Auckland operations began in late 2020). As you would expect for a business based in the world’s most populated country, the scope of their business operations is hard to comprehend. Didi has almost half a billion annual active users, 15 million drivers (three times the population of New Zealand), and completed an average of 41 million rides per day over the last 12 months (this translates into 14.5 ...

Since December 2020, we have had a positive market view. The successful results of trials of the Covid-19 vaccine in November meant the way to generate returns has been to invest on a roaring rebound in the global economy, as government stimulus, low interest rates and pent-up demand for all the things the pandemic denied people – holidays, dining out, shopping – was unleashed. This ‘reflation’ trade lifted the prices of shares and commodities, such as copper, to record heights. This lifted global shares, especially the share prices of firms hardest hit by the pandemic, such as airlines and retailers. Fast forward to 11 June 2021 | The return of inflation where we discussed that, as inflation increases in the United States, the probability rises that the Federal Reserve (‘the Fed’) will respond by increasing interest rates. 'Inflation is sticky after all' – Jerome Powell But sentiment changed at the 16 June 2021 Fed meeting where Chair Jerome Powell suggested th...