20 years and going strong

Webinar Sections:

Introduction

Fund Update & Performance

Market Observations

Portfolio Positioning

Stock Examples

Q&A

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Over two decades, co-portfolio managers Ed and Steve have skilfully navigated diverse market conditions, achieving an impressive 11.8%¹ return since inception—outperforming both the small ordinaries index by 7% and small industrials by 6.6%. Despite market challenges, their disciplined investment approach has remained consistent, focusing on robust balance sheets and thorough cashflow analysis—a strategy unchanged since day one.

Ed Prendergast provides an investor update webinar where he discusses the current market opportunities and the rationale behind current portfolio positioning. He also shares insights from the recent reporting season.

CPD points applicable for Australian Financial Planners

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Webinar Highlights:

1. Consistent Long-Term Outperformance:
   The Pengana Emerging Companies Fund, co-managed by Ed Prendergast and Steve Black for 19 years, has achieved a 12.5%¹ annual return since inception, more than twice the market’s return. This success is attributed to their disciplined, conservative investment strategy, focusing on profitable, predictable businesses and avoiding risky sectors.
2. Capital Preservation During Downturns:
   A key strength of the fund is its ability to preserve capital during market downturns, which has significantly contributed to its long-term outperformance. This conservative approach ensures resilience and stability, even during challenging economic periods.
3. Investment Strategy and Portfolio Characteristics:
   The portfolio is heavily weighted towards defensive growth stocks, making up about two-thirds of their holdings. These include businesses with little economic sensitivity, such as funeral services and telcos. The fund also maintains a small cash position and invests selectively in financials and cyclical stocks with underlying growth potential.
4. Focus on Stock Picking Over Market Timing:
   The portfolio managers do not engage in market timing or asset allocation. The fund is fully invested, and the managers focus on picking the best small companies rather than holding cash or making macroeconomic predictions.
5. Diverse Portfolio with Strong Growth and Resilient Holdings:
   The fund’s diverse portfolio includes companies with strong growth potential. Jumbo Interactive leads in online lottery ticket sales, while CarSales shows resilience and international growth. Seven Group’s WestTrac division provides steady revenue from Caterpillar truck sales and services. Catapult, a leader in wearable sports technology, has returned to profitability and is expanding globally. Long-term investments in insurance brokers like PSC and Steadfast have been profitable, with recent sales reflecting caution due to high valuations and industry consolidation.

 

1. Pengana as at 30 April 2024. Inception date: 1 Nov 2004. Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. Past performance is not a reliable indicator of future performance, the value of investments can go up and down. The Fund does not invest in resource stock. Resource stocks are included in the S&P Small Ordinaries Index but not the ASX Small Cap Industrials Index.