The update below is authored by Janus Henderson Investors and reproduced, with permission, by Willis Owen.
The fund returned 7.5% in the second quarter, outperforming both its benchmark index, the MSCI All Countries World which returned 6.3%, and also the Peer group benchmark which returned 6.4%.
From a sector perspective, the fund saw notable positive contributions from holdings in the health care, IT and financials sectors. There were no significant detractors at the sector level.
American Express (Amex) was the strongest contributor to performance over the period. Amex is unique among peers in that it owns and controls the network that its proprietary cards operate on, thereby allowing the business to retain a greater proportion of the economic value generated. This is important as it allows Amex to offer more attractive member rewards than competitors, which in turn encourages card holders to spend using their Amex card and earn more rewards rather than use alternative cards. The business has demonstrated a high level of earnings power over many years and has consistently returned surplus cash to shareholders through dividends and share buybacks.
Icon, an Irish company and one of the largest listed contract research organisations (CROs) companies, also contributed positively. CROs help pharmaceutical and biotech clients launch new drugs by managing the clinical trial process. The complexity of running clinical trials has increased markedly in the last 20 years, with regulators requiring more data and longer treatment periods to prove the safety and efficacy of drugs. The resulting increase in costs has encouraged the outsourcing of more and more of this work to specialised CROs, but with the addressable market less than 50% penetrated currently, and with the top five firms only accounting for around 40% of that, this is a long-term trend we see continuing for many years to come. Icon sets itself apart within its industry by having an exceptional track record of operational performance, an innovative approach to adopting new technologies, and a balance sheet that provides significant financial flexibility.
Whitbread detracted from performance. Whitbread is the owner of the leading branded budget hotel chain in the UK, Premier Inn. It released weaker than expected results in April principally due to the weaker UK economy. That said, we do not feel that the market is accurately reflecting the value inherent in the business. In particular we believe the company is not receiving sufficient credit for the value of its freehold property portfolio given that Whitbread owns around two thirds of its properties directly. The potential for the market to recognise this value, as well as Whitbread's strong franchise and solid cash generation, leaves us comfortable with our position.
Cognizant also detracted after issuing first quarter results which disappointed the market. Moreover, its newly appointed CEO, Brian Humphries guided down expectations for both revenue growth and profitability. Cognizant has performed well over the longer term but has been hurt by a poorly thought out transition to a new sales and operational structure. In addition, the involvement of an activist investor a few years ago arguably resulted in a shift in direction away from Cognizant's successful way of operating. Whether the new CEO can return the business to the type of performance we were used to in the past remains to be seen and we are re-evaluating our investment in this name.
Austrian industrials company Andritz was a detractor after it issued lower guidance due to weakness in its metals business. As a supplier of plant, equipment and services for use in the hydropower, pulp, metal fabrication and waste industries we are aware orders can be lumpy and downgrades can happen. However, the deterioration in the strength of the balance sheet, as well as issues in its hydro and metals business are beginning to look more structural than temporal which is concerning. Consequently, we decided to exit our position.
|Discrete year performance
||Janus Henderson Global Equity Fund (%)
||MSCI AC World Index (%)
||IA Global (%)
|1 year to 30/06/2019
|1 year to 30/06/2018
|1 year to 30/06/2017
|1 year to 30/06/2016
|1 year to 30/06/2015
* Source: Morningstar, at 30 June 2019, nav-nav, net income reinvested, net of fees, Class I Acc shares, in Sterling. Past performance is not a guide to future performance. Prices can go up and down and you may not get back the amount originally invested. NAV = net asset value.
Index - MSCI All Countries World Index
Index usage - Comparator
The MSCI All Countries World Index is a measure of the combined performance of large and medium sized companies from both developed and emerging stock markets around the world. It provides a useful comparison against which the Fund's performance can be assessed over time
Peer group benchmark - IA Global
Peer group benchmark usage - Comparator
The Investment Association (IA) groups funds with similar geographic and/or investment remit into sectors. The fund's ranking within the sector (as calculated by a number of data providers) can be a useful performance comparison against other funds with similar aims.
As ever, our strategy is to avoid making major macroeconomic calls and to instead focus bottom-up on finding companies with underappreciated growth and high barriers to entry at attractive valuations. Through purchasing undervalued securities that are exposed to strong secular tailwinds of growth, we aim to generate attractive returns over the longer term.
Janus Henderson Investors
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Please read all scheme documents before investing. Before entering into an investment agreement in respect of an investment referred to in this document, you should consult your own professional and/or investment adviser. Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor's particular circumstances and may change if those circumstances or the law change. If you invest through a third party provider you are advised to consult them directly as charges, performance and terms and conditions may differ materially. Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. Any investment application will be made solely on the basis of the information contained in the Prospectus (including all relevant covering documents), which will contain investment restrictions. This document is intended as a summary only and potential investors must read the prospectus, and where relevant, the key investor information document before investing. [We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.] The Custodian in Spain is BNP PARIBAS SECURITIES SERVICES S.C.A.
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