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Commodities Trading Ideas & Charts

NiSource Accelerated Investment Should Lead to Growth

From the Best Ideas report:

“Natural gas utility share prices have lagged the Morningstar US Utilities Index as the economy recovers from COVID-19, due in part to environmental con-cerns about the long-term use of natural gas. However, we believe the electrification of building space and water heating has significant technical and economic obstacles and the market’s misperception of the future of nature gas results in an attractive price for NiSource shares.

“The fully regulated company derives about 60% of its operating income from its six natural gas distribution utilities and the remaining 40% from its electric utility business in Indiana. NiSource has accelerated the pace of gas pipeline restoration investment following a tragic natural gas explosion in 2018, and this will reduce risk and cut methane emissions. Its electric utility will close its last coal-fired power plant in 2028 and replace the capacity with wind, solar, and energy storage.

As a result of favorable regulation and renewable energy investments, we expect NiSource to step up its capital expenditures to almost $12 billion over the next five years, almost 40% higher than the pre-vious five years. The accelerated investment should result in better than 7% EPS growth, strong dividend growth, an improved ESG profile, and reduced risk for investors.”

NiSource Inc. is one of the largest fully regulated utility companies in the United States, serving approximately 3.5 million natural gas customers and 500,000 electric customers across seven states through its local Columbia Gas and NIPSCO brands

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Dividend Stocks Shares

Telstra Corp – Show Off Infrastructure Strength

The strategic intent is taking shape: segregate the AUD 200 million EBITDA-generating InfraCo Towers for potential monetisation (akin to Optus’ current moves to do the same), maintain the optionality of keeping the AUD 1.5 billion EBITDA-generating InfraCo Fixed stand-alone (as NBN mulls its future ownership), and continue refocusing the AUD 5.7 billion EBITDA-generating ServeCo on its transformation to become a more simple, efficient, and digital-centric competitor.

Rather than having investors obsess over the ebbs and flows of Telstra’s near-term earnings still suffering from the margin-crunching impact of NBN and competition, the restructure is likely to shift investor focus to the group’s underlying asset values. We expect a flurry of favourable sum-of-parts asset valuations to hit the market over the coming months, underpinned by the current low-interest rate environment and possibly “inspired” by the lucrative investment banking and advisory fees on offer.

The cloud surrounding Telstra’s near-term earnings is also clearing. Management not only reiterated fiscal 2021 earnings guidance (second-half-weighted and driven by cost-cuts, COVID-19 recovery, mobile earnings growth), but also provided encouraging signs for beyond. Return to underlying EBITDA growth in fiscal 2022 (excluding one-off NBN receipts) and an upgrade to fiscal 2023 return on invested capital, or ROIC, to 8% (from 7%) are all broadly in line with our unchanged estimates. But they are still comforting, especially after the shock of the August update when management (too conservatively) trimmed fiscal 2023 ROIC target to 7%-plus (from 10% previously).

As an illustration of the type of sum-of-parts valuation that investors may see in the coming months, traditional infrastructure entities typically trade at low-to-mid-teen EBITDA multiples. We see no reason why Telstra’s InfraCo Towers and InfraCo Fixed won’t attract similar multiples, given their recurring, predictable and indexed earnings growth (at margins of well over 60%) and likely long-term contracts with Telstra and NBN as anchor tenants. Applying, say, a 12 times multiple to both InfraCo Towers’ fiscal 2020 pro forma AUD 200 million EBITDA and InfraCo Fixed’s AUD 1.5 billion EBITDA, and 8 times to the still-rationalising ServeCo’s AUD 5.7 billion EBITDA produces total enterprise value of AUD 66.0 billion. Subtract AUD 16.8 billion in net debt and one can come up with an asset-based valuation of around AUD 4.10 per share for Telstra. And we are likely to witness much more creative ways to boost this value from the investment community in the future. Our unchanged AUD 3.80 fair value estimate for Telstra will remain based on a discounted cash flow methodology.

 (Source: Morningstar)

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General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Dividend Stocks Shares

Merck MRK High-Margin Drugs and Vaccines

Human hand stacking generic coins over a black background with hexagonal golden shapes. Concept of investment management and portfolio diversification. Composite image between a hand photography and a 3D background.

Management expects Organon, after it’s spun off in the second quarter, “to pay a meaningful dividend that will be entirely incremental to that of Merck.” It also intends to keep Merck’s payout ratio in the 47%–50% range. Based on consensus earnings for 2021 and 2022, Merck should be able to maintain solid dividend growth while remaining within that range.

“Merck’s combination of a wide lineup of high-margin drugs and vaccines along with a pipeline of new drugs should ensure strong returns on invested capital over the long term. Merck is well positioned to gain further entrenchment in immuno-oncology with Keytruda, which holds a strong first-mover advantage in the large first-line non-small-cell lung cancer market with excellent data. Also, we expect Keytruda to gain ap-provals in early-treatment settings, which should open up underappreciated sales potential.

“Merck’s vaccines look ready to drive further gains, led by human papillomavirus vaccine Gardasil, which continues to generate excellent clinical data. While the firm’s late-stage pipeline lacks several new blockbusters, we expect early-stage assets focused on cancer to move through trials rapidly.

Even though Merck faces some patent losses over the next five years, including diabetes drug Januvia, we expect new drug launches and gains from currently marketed products to more than offset generic competition.

Merck & Co., Inc., d.b.a. Merck Sharp & Dohme outside the United States and Canada, is an American multinational pharmaceutical company headquartered in Kenilworth, New Jersey. It is named after the Merck family, which set up Merck Group in Germany in 1668. Merck & Co. was established as an American affiliate in 1891. 

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Dividend Stocks

Coach’s Enduring Popularity Provides Stability as Tapestry Establishes Its Acceleration Program

Due to the pandemic, all three of Tapestry’s brands suffered sales and operating profit declines in fiscal 2020, but its results are improving rapidly in fiscal 2021 as it implements its three-year Acceleration Program strategy to cut costs and improve margins.

Coach shares many of the qualities of other luxury brands per the Morningstar Luxury Brand Power Framework and, therefore, has the brand strength and pricing power to continue to provide a narrow moat for Tapestry. Coach struggled with excessive distribution and competition in the past, but we think Tapestry has turned it around through store closures, restrictions on discounting, and increased e-commerce, which has grown by triple-digit percentages during the pandemic. Further, we expect growth in complementary categories like footwear and fashion. We anticipate China to be a key growth region for Coach as, according to Bain & Company, Chinese consumers will compose 46% of the worldwide luxury goods spending in 2025, up from 35% in 2019. We forecast Coach’s greater China sales will increase to nearly $1.2 billion in fiscal 2030 (21% of sales) from $601 million in fiscal 2020 (17% of sales).

We do not believe the acquisitions of Kate Spade and Stuart Weitzman contribute to Tapestry’s moat. Spade was a natural fit for Coach as both generate most of their sales from Asia-sourced handbags. However, Spade merchandise is priced lower than Coach and lacks its international reach. Still, we think Spade can grow in both North America and Asia through store openings and new products, such as shoes (currently licensed). Tapestry has a stated goal of $2 billion in Spade revenue, which we forecast will not be achieved until fiscal 2030. As for Stuart Weitzman, while its women’s shoes achieve luxury price points, we view it as a niche brand (less than $300 million in fiscal 2020 sales) with fashion risk. Stuart Weitzman is struggling so much that Tapestry recently wrote off all the goodwill and intangibles related to its purchase and is downsizing its store base.

Real Value and Profit Maximisers

We are raising our per share fair value estimate on Tapestry to $43.50 from $40.50, which implies a fiscal 2022 P/E of 13 and an EV/EBITDA of 8. The COVID-19 pandemic forced the temporary closure of Tapestry’s stores and continues to affect consumer spending on accessories and apparel in some regions. However, Tapestry’s third quarter of fiscal 2021 was better than expected as e-commerce and strong sales in mainland China (up more than 40% as compared with two years earlier) partially offset store disruptions. Given this momentum, we have raised our fiscal 2021 sales growth and adjusted operating margin expectations to 14.7% and 19.0%, respectively, from 9.8% and 17.8%.

We now forecast adjusted EPS of $2.94, up from $2.64 previously. For fiscal 2022, we estimate EPS of $3.23 (up from our prior estimate of $2.80) on 7% sales growth.

Tapestry has started its three-year Acceleration Program to boost sales and profits. This program, which includes store closures and cost cuts, could reduce sales of Kate Spade and Stuart Weitzman in the short term. We project sales growth rates of 20% and 4.1% for Coach and Kate Spade, respectively, in fiscal 2021, but a decline of 7% on permanent store closures for Stuart Weitzman in Europe and Asia (excluding China).

We forecast selling, general, and administrative expenses as a percentage of sales for Tapestry of around 51% in the long term. While we expect the firm will achieve some expense savings under the Acceleration Program, we also think it will invest in advertising and other selling expenses to support each of its brands. As sales shift rapidly to digital channels, we expect only moderate increases in individual brand store bases over the next decade. We anticipate little or no store growth in North America, but some expansion in China and other international territories. At the end of fiscal 2030, we forecast Tapestry will operate 959 Coach stores (958 at fiscal 2020), 561 Spade stores (420 at fiscal 2020), and 173 Weitzman stores (131 at fiscal 2020). We have raised our long-term tax rate to 19.0% from 16.5% in anticipation of a possible increase in the U.S. corporate tax rate.

Tapestry Inc’s Company Profile

Coach, Kate Spade, and Stuart Weitzman are the fashion and accessory brands that comprise Tapestry. The firm’s products are sold through about 1,500 company-operated stores, wholesale channels, and e-commerce in North America (62% of fiscal 2020 sales), Europe, Asia (32% of fiscal 2020 sales), and elsewhere. Coach (71% of fiscal 2020 sales) is best known for affordable luxury leather products. Kate Spade (23% of fiscal 2020 sales) is known for colourful patterns and graphics. Women’s handbags and accessories produced 68% of Tapestry’s sales in fiscal 2020. Stuart Weitzman, Tapestry’s smallest brand, generates nearly all (98%) of its revenue from women’s footwear.

Source: Morningstar

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

Narrow-Moat Splunk Continues to See Cloud-Transition Linked Uncertainty; Lowering FVE to $164

As a result, we are lowering our fair value estimate for Splunk to $164 from $212, but continue to view shares as undervalued at the moment. In spite of increased uncertainty, the cloud transition continues at a solid pace, with over 50% of software bookings coming from the cloud. We expect sustained cloud penetration, a growing robust product suite, and strong execution to lead to healthy long-term growth.

First-quarter revenue increased 16% year over year to $502 million. After several quarters of declines in the top line as a result of the cloud transition, accelerated adoption of Splunk’s robust product suite, as well as growing cloud traction have resulted in revenue growth once again. As cloud revenue is recognized ratably over time rather than up-front (as with term licenses), Splunk has been facing top line pressure for some time. This has been compounded by falling contract durations as a result of macroeconomic uncertainty and growing cloud demand. However, as we predicted, Splunk is now exhibiting growth in the latter part of the transition, and we expect this to persist in the future. First-quarter cloud revenue grew 73% year over year to $194 million, with cloud annual recurring revenue, or ARR, up 83% over the same period. This contributed to a 39% increase in total ARR. Even though management has withdrawn some long-term targets, healthy growth in cloud adoption has Splunk still on track to wrap up the cloud transition sooner than previously expected.

During the quarter, Splunk acquired TruSTAR, a cloud-based security threat detection and response solution. We believe this should augment Splunk’s security solutions by incorporating additional solutions into its already robust security product set and augmenting demand for the security buying center. The firm also rolled out the Splunk Observability Cloud, enabling businesses to use a unified platform to address a wide range of observability use cases. In addition, Splunk announced the appointment of Teresa Carlson in the position of President and Chief Growth Officer. In terms of guidance for the second quarter of fiscal 2022, management expects revenue between $550 million and $570 million, up approximately 14% at the midpoint. NonGAAP operating margins are expected to be negative 25%, reflective of the cloud transition and greater investments into the firm’s platform. While management did not provide full-year guidance, we expect the firm to successfully complete its shift towards the cloud and support healthy top-line growth in the future.

Splunk Inc’s Company Profile

Splunk provides software for machine log analysis. Its flagship solution, Splunk Enterprise, is employed across a multitude of use cases, including application management, IT operations, and security. The company has historically deployed its solutions on-premises, but the software-as-a-service delivery model is growing in popularity with Splunk Cloud.

The company derives revenue from software licenses, as well as cloud subscriptions, maintenance, and support.

Source: Morningstar

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

Guidewire’s Cloud Is Gaining Steam; Initial Fiscal 2022 Outlook Is Constructive; Maintain $116 FVE

investment stockbroker risk analysis. Financial analysis using phone app and laptop. Market trading profit.

Overall, the firm saw 12 go-lives on 30 different products, with cloud momentum continuing. We continue to believe Guidewire turned the corner in terms of product development, customer references, and new deal activity beginning in the January quarter. We also get the sense the services business is once again on a smooth track. Management also provided a preliminary outlook for fiscal 2022 that was perhaps a little light on total revenues, which is likely due to conservatism and is fairly consistent with our model. We expect Guidewire will be the primary winner as the P&C insurance industry continues to modernize. We are maintaining our fair value estimate of $116 per share and see shares as increasingly attractive as the software group has sold off thus far in 2021.

Third-quarter revenue declined 2% year over year to $164 million, compared with the high end of guidance of $159 million and FactSet consensus of $158 million. Compared with our model, subscription and support was well ahead, while services were slightly ahead, and license lagged. Data and analytics remain strong. ARR grew 11% year over year to $538 million in the quarter, which is consistent with the firm’s full-year ARR growth outlook.

Based mainly on a better outlook for subscriptions and services, Guidewire raised its full-year guidance to $735 million and $17 million at the midpoints for revenue and non-GAAP operating profit, respectively, from $729 million and $6 million. We continue to see guidance as conservative, especially for operating profit and particularly given upside this quarter, and we note that our model is just under the high end of guidance.

Management also provided some preliminary guidance for fiscal 2022. Key points here include total revenue growth of 3% to 5%, non-GAAP operating margin expansion, and ARR growth of 12% to 14% from the midpoint of the fiscal 2021 outlook. We view this outlook as a conservative preview for next year that is largely consistent with our model–although we did lower our revenue growth outlook by approximately 150 basis points.

Non-GAAP operating margin was negative 9.9% in the quarter, compared with 3.4% last year, which was significantly better than the negative 17.2% at the midpoint of guidance. Higher revenue and a slower-than-anticipated pace of hiring drove overall margin upside. Despite better than-anticipated margins, the ongoing shift to cloud deals continues to pressure margins year over year. Ultimately, we see nothing within results that impact our long-term operating margin outlook and expect steady improvement over time. Granted, we still see continued margin pressure over the next several quarters due to the model transition.

Guidewire Software Inc’s Company Profile

Guidewire Software provides software solutions for property and casualty insurers. Flagship product InsuranceSuite is an on-premises system of record and comprises ClaimCenter, a claims management system; Policy Center, a policy management system including policy definitions, quotas, issuance, maintenance, and renewal; and Billing enter, for billing management, payment plans, and agent commissions. The company also offers insurance Now, a cloud-based offering, as well as a variety of other add-on applications.

Source: Morningstar

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Currencies

Goldman has changed its tune towards Bitcoin “Not an asset class to asset class”

The renowned investment bank remains a sceptic of bitcoin and other cryptocurrencies. While cryptocurrencies like bitcoin have gotten a lot of publicity, Goldman says Bitcoin is “not an asset class”.

The previous Goldman Sachs research was pessimistic about cryptocurrency and stated that it was not an asset class. According to “Goldman Sachs, it was not an asset class because of the following characteristics: –

No cash flows –

No earnings –

Unstable correlations –

High volatility –

Goldman Sachs claimed that the only reason that Bitcoin has value is because other people are willing to buy it. They also compared it to a number of other periods of market euporia.

Goldman Sachs, on the other hand, released a study on May 21st addressing their previous stance that Bitcoin was not an asset class changed. The top of the report is headlined ‘Crypto: a new asset class’ they interviewed Mike Novogratz (CEO of Galaxy Digital Holdings Ltd.). He claims that the institutional adoption we’ve observed will likely continue as long as the macro trends we’ve witnessed persist, he also believes that Defi, NFTs, and payments, all of which are currently built on Ethereum, will drive some of the most interesting growth in the crypto world.

Zach Pandl who is one of Goldman’s top strategists agrees with Novogratz, he believes that the Bitcoin has the potential to become a major global macro play factor. Jeff Currie, Heading commodity research, believes that for cryptocurrencies to be an excellent store of value, it must have applications other than price speculation.

Christian Mueller Glissman, a senior strategist at Goldman Sachs illustrated that even a minor investment to Bitcoin (5%) in a traditional 60/40 bond equities portfolio would have outperformed the market. He claims that this is due to Bitcoin’s relative lack of correlation with traditional assets, despite the fact that this correlation has increased significantly over the past year.

They compared the price increase of crypto with those of other assets throughout the course of the year. What’s shocking is the Goldman Sachs Commodities index’s tremendous surge (refer a link below). This indicates that more inflation is on the way. Report also has a chart that shows the volatility that have had for these assets over the year. Report also illustrated that the year’s volatility for various assets. While cryptocurrency is volatile, it must be weighed against the possibility for profit. As the blockchain becomes more widely used, this volatility is likely to decrease over time. As a result, utility demand rises, boosting the currency’s value. They also demonstrate that the people with the biggest pockets are the ones who are most inclined to “Hold on for dear life” in the long run.

(Snap*)

There’s a reason Goldman has shifted its stance on Bitcoin: their clients are asking for exposure to the cryptocurrency. If they believe it isn’t an asset class, they won’t be able to serve these clients. They’ve even set up internal trading desks that have just completed a derivative linked swap transaction.

Get an access of report – https://www.goldmansachs.com/insights/pages/crypto-a-new-asset-class.html

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Shares Small Cap

Sales Surge at O’Reilly Automotive Inc

The firm has profited from increases in miles driven and average vehicle age as well as the benefits of its expansive distribution network in ensuring part availability, leading to adjusted returns on invested capital that have grown more than

900 basis points since 2010, to 22% in 2019 (before a pandemic-related surge led to a 30% 2020 mark).

With a strong operational record and national presence, O’Reilly features a highly productive infrastructure, with strong margins despite investments in service and high levels of part availability. While other chains have attempted to adopt a similar dual-market approach, we believe O’Reilly’s expertise and customer relationships give it an advantage that will take time for peers to match. This should keep O’Reilly’s relative positioning strong among the national retailers as the industry consolidates, with large-scale participants like O’Reilly increasingly favored due to their ability to provide hard-to-find parts to commercial (and, to a lesser extent, DIY) customers more quickly, reliably, and efficiently. We estimate the firm should achieve meaningful share growth in both segments, to 12% in DIY and 8% in commercial from 10% and 6% before the pandemic, respectively, over the next decade.

While O’Reilly’s operating margins grew from 13.6% in 2010 to 18.9% in 2019 (pandemic-fueled cost leverage led to a 20.8% 2020 mark), we see room for expansion as it leverages fixed costs and as house label products gain increasing acceptance and adoption. The strength of its brand, coupled with its cost advantage, should enable the firm to foster new and deepening relationships with its customers by providing a better standard of service, protecting O’Reilly’s results from competitive threats from smaller and like-sized peers. Although the pandemic’s sales surge should ease in mid-2021 as vaccination rates rise and comparisons become challenging, O’Reilly’s long-term strength remains rooted in its competitive advantages.

Company Profile

O’Reilly is one of the largest sellers of aftermarket automotive parts, tools, and accessories, serving professional and DIY customers (41% and 59% of 2020 sales, respectively). The company sells branded as well as own-label products, with the latter category comprising nearly half of sales. O’Reilly had 5,616 stores as of the end of 2020, spread across 47 U.S. states and including 22 stores in Mexico. The firm serves professional and DIY customers through its store network, and also boasts approximately 765 sales personnel targeting commercial buyers.

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Global stocks Small Cap

Link Administration Holdings Ltd

The acquisition of U.K.-based Capita Asset Services in 2017 reduced the proportion of revenue from Link’s Australian businesses to around 60% of group revenue. We expect the key earnings driver for both the U.K. and Australian businesses to be cost reductions over the next three years, underpinning an EPS CAGR over the next decade of around 10%.

  • Link benefits from high customer switching costs and relatively low marginal costs, which underpin its narrow economic moat rating. The capital-light business model should enable returns on invested capital to comfortably exceed the weighted average cost of capital.
  • We forecast EPS to grow at a CAGR of 10% over the next decade, driven by revenue growth and margin expansion from acquisition-related synergies.
  • Questions remain around earnings growth drivers beyond planned cost cuts. Link may use acquisitions to drive earnings growth, but this strategy has associated risks.

Link Administration has created a narrow economic moat in the Australian and U.K. financial services administration sectors via its leading positions in fund administration and share registry services. Client retention rates exceed 90% in both markets, underpinned by inflation-linked contracts of between two and five years. The capital-light nature of the business model should enable good cash conversion, regular dividends, and relatively low gearing. Earnings growth prospects are supported by organic growth in member numbers, industry fund consolidation, and continued outsourcing trends.

The company was formed via numerous acquisitions made since 2005 under the ownership of private equity firm Pacific Equity Partners, banks and AMP, which have a reasonably low probability of outsourcing. The remaining 30% comprises a combination of government-owned entities and relatively small superannuation funds, which are likely to have outsourcing lead times of months or years.

Bulls Say

  • We expect Link’s EPS to grow at a CAGR of 10% over the next decade, driven by a revenue CAGR of 5% per year, in addition to cost-cutting and operating leverage.
  • Our base case assumes Link’s Australian fund administration market share grows by 2.5 percentage points to 32.5% over the next five years.
  • The capital-light nature of the business model should enable regular dividends, and low financial leverage creates the opportunity for debt-funded acquisitions.

Bears Say

  • Both superannuation fund administration and share registry services are reasonably commoditized, and sizable competitors exist in both segments.
  • Link’s core businesses may struggle to grow meaningfully beyond low- to mid-single-digit growth rates.
  • Superannuation fund administration and registry services have become more efficient as a result of increasing use of software and automation of processes. However, this raises the prospect of disruption by new software-based solutions.

Source:Morningstar

Disclaimer

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Funds Funds

Federated Hermes MDT Small Cap Growth R6

The team is experienced at the top. Dan Mahr joined MDT in 2001 and became lead manager of this fund in 2008. He is responsible for the model and research and draws on seven managers/analysts. Frederick Konopka also became a manager in 2008 and handles portfolio construction and trading for the team.

The fund’s approach is differentiated. MDT looks to group companies into different baskets producing various streams of alpha potential using valuation, growth, momentum, and quality indicators. By using classification and regression tree analysis, the team can test thousands of potential combinations of factors based on 30-plus years of U.S. stock data to find the best mixtures of alpha using a three-month investment horizon. For example, the model could forecast positive alpha from low price and low debt, but also high price and stable business, which a standard linear regression model can’t do.

Still, such a short investment horizon can be difficult to implement. It leads to annual portfolio turnover that can be lofty and varies greatly. Over the past five years, turnover ranged from 188% to 227%, well above the 59%-66% range for the typical small-growth Morningstar Category peer. The portfolio’s holdings have varied from 150 to 250, suggesting some opportunities may be too illiquid and costly to pursue unless they’re spread out across more holdings.

Since Mahr became lead manager in August 2008, the Institutional shares’ 11.9% annualized return through April 2021 lagged the small growth category’s 12.2% gain and the Russell 2000 Growth Index’s 12.2% rise. The fund has performed better since the team’s 2013 process switch to multiple decision trees, but the fund’s high volatility has kept its risk-adjusted results in line with the index. Investors should consider other options.

The fund’s absolute and risk-adjusted returns lag the Russell 2000 Growth Index during lead manager Dan Mahr’s tenure. Since Mahr took over in August 2008, the Institutional shares’ 11.9% annualized return through April 2021 trailed the small-growth category’s 12.2% gain and the Russell 2000 Growth Index’s 12.2% rise. It has done so with more volatility than the benchmark, resulting in subpar risk adjusted performance measures, like the Sharpe ratio. Most of the fund’s underperformance has come during market turbulence. Mahr’s Aug. 31, 2008,start date means he took over amid the credit crisis, and the fund barely edged the benchmark through that period’s March 9, 2009, bottom. The fund lagged the bogy’s ensuing trough-to-peak (April 23, 2010) performance by 26.6 percentage points, annualized. The fund has performed better since the team’s 2013 switch to using multiple decision trees for regression analysis, though. Its 16.8% annualized gain through April 2021 bested the index’s 16.1%. However, the fund’s elevated volatility has caused the fund to struggle in market pullbacks, such as late 2018’s correction. It also underperformed in 2020’s first-quarter coronavirus driven pullback. That volatility has helped it advance in market rallies and has captured 102% of the market gains during that span.

SOURCE:MORNINGSTAR

Disclaimer

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.