E-commerce and tech-enabled holdings carry the baton for Monks

Over the year to 30 April 2020, global growth trust, Monks (MNKS), delivered an NAV total return of 3.4% compared , which compares with (1.0%) for the FTSE World Index. The market return for the same period was 3.7%. Over the year, MNKS used its premium to NAV valuation to grow the fund, with an issuance equivalent to 2.3% of the company’s share capital, raising over £46m.

Amazon and Shopify deliver

Performance was led by several technology businesses, including Amazon (ecommerce and cloud), Shopify (ecommerce) and Teladoc (telemedicine), all of which have seen an acceleration in demand for their services.

Discussing performance, managers, Charles Plowden, Spencer Adair and Malcolm MacColl, said: “Among the best performers were the healthcare and online technology companies. In the healthcare setting, Seattle Genetics (cancer treatment), Olympus (medical endoscopes) and Alnylam (gene silencing) saw their share prices rise, underpinned by strong operational progress. The holding which has most directly benefitted in the current environment is Teladoc, a relatively recent purchase, which is the largest provider of telemedicine consultations in the US. Accelerated growth at this point in the development of the industry may see Teladoc’s leadership position entrenched and represent the tipping point in widespread adoption of telemedicine in the US and beyond.

The acceleration of demand for online goods and services has benefitted several technology holdings. Two particularly strong performers were ecommerce businesses, Amazon and Shopify. As well as its burgeoning ecommerce platform, Amazon is also a logistics and delivery service for both durable goods and groceries, a music and video entertainment platform and a cloud service provider. In short, it is central to the lives and livelihoods of millions of people. If the company can serve people well during this time, then it may emerge from this crisis in a far stronger position than it entered it. The Canadian software company Shopify enables businesses to sell products online and has been growing internationally and expanding its addressable market from small and medium sized enterprises to large corporates. Demand for its services is likely to be at a premium in the coming months. Other likely beneficiaries in the portfolio include the likes of Naspers (food delivery, classified advertising and social media), Netflix (online entertainment), Chegg (online education) and Meituan Dianping (food delivery).

Tesla, the electric vehicle manufacturer has also been a strong performer over the period. Despite a hugely volatile ride in share price terms (Tesla’s share price more than doubled in the early part of this year, at which point we reduced our holding) the company has executed well. It posted record deliveries in the last quarter of 2019 (112k vehicles). We see a clear path for further growth following the completion of the Shanghai production facility (Berlin is next) and believe that Elon Musk and his team retain a suitably ambitious vision for the company.”

Chairman, James Ferguson, noted the following, in his outlook statement: The last decade has seen an anaemic recovery in Western economies accompanied by dormant inflation, historically low interest rates and steadily strengthening stock markets. While this combination has surprised some observers, it is less surprising when one considers the main contributors to the rise in markets. Most of the gains have been driven by new technologies, many of them deflationary, which have allowed new corporate champions to appear and expand globally at an unprecedented rate. The level of change is remarkable, with seven of the ten most valuable quoted companies in the world now being technology companies, up from three a decade ago. The key point from an investment perspective is that a small number of companies have caused the markets’ rise, while many traditional industries have struggled to adapt or grow. This has highlighted the growing gap between corporate winners and losers.

The current pandemic is likely to accelerate trends that were already in play, driven by technological change and environmental necessity. Monks is well placed to benefit from these trends, with a significant exposure to the industries and companies of the future.”

MNKS: E-commerce and tech-enabled holdings carry the baton for Monks

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