Portfolio Holdings

What does it do?

Ansell designs, develops, manufactures, and markets a wide range of personal protective equipment (predominantly gloves) for use in various industrial and manufacturing activities and in healthcare. It is essentially an industrial materials business that transforms natural rubber latex and synthetic latex into these value-added products. It is a leading player (#1 or #2) in all its key market segments.

Why do we own it?

Ansell has an attractive combination of businesses that benefit when the world economy grows and those that enjoy relatively resilient demand even when economies are weak. We expect the company’s earnings to grow over time as better health and safety standards are adopted in emerging markets and as it successfully differentiates its products from the commodity-end of the markets it serves through both branding and product innovation.

What does it do?

Australia and New Zealand Banking Group Limited (ANZ) has significant retail and business banking operations in its home markets of Australia and New Zealand. It has a leading agricultural banking business in New Zealand.

Why do we own it?

Along with the other major Australian banks, ANZ enjoys a supportive industry structure and has a wide economic moat. The major banks’ scale, capital strength, regulatory expertise, technology and brands constitute significant barriers to entry for potential competitors, allowing the banks to earn healthy returns on their capital.

What does it do?

AUB Group operates a general insurance broking network across Australia and New Zealand that is primarily focussed on the small to medium-sized business market. The broking network is complemented and supported by AUB’s ownership of a range of insurance underwriting agencies and of Tysers, a large London-based wholesale insurance broker.

Why do we own it?

We like AUB's owner-driven business model where member firms are strongly incentivised to grow. The insurance broking industry remains ripe for consolidation, allowing AUB to be an aggregator of smaller broking firms. The combination of adding more firms to the network, long-term organic growth in the insurance market, and the benefits of scale should drive healthy earnings growth for AUB over time.

What does it do?

Audinate is the leading provider of professional digital audio networking technologies. Audinate’s technology, branded as ‘Dante’, distributes digital audio signals over computer networks. It is sold to and incorporated in professional sound equipment produced by global manufacturers (such as speakers and amplifiers). Dante technology is displacing analogue networking technology.

Why do we own it?

Dante technology has become the standard technology globally for digital networking of sound systems. For products from one manufacturer (say speakers) to be digitally networked with products from another manufacturer (say a microphone), both products need the Dante technology. This creates a virtuous circle of demand for Dante technology as more and more sound systems are digitally networked. This acts as a significant competitive advantage and helps cement Audinate’s leading position in the development of the digital professional audio networking market. Analogue systems are at an early phase of displacement. As such, Audinate has a long runway of growth in front of it, which we like. It also has a strong balance sheet (it is in a net cash position) and has the ability to therefore keep investing heavily in innovation and development which could also create further value for shareholders in the future.

What does it do?

BHP is among the most competitive mining companies in the world, with particularly advantageous positions in copper, iron ore and potash markets.

Why do we own it?

BHP enjoys significant cost advantages over its competitors. Its large mining operations deliver scale benefits and high-grade ore bodies enhance the sales value of its products. This advantage sees the company earning superior profits over the commodity price cycle and faring better than peers in periods of weakness.

The iron ore industry is mature (i.e. demand by steel makers for iron ore is not growing rapidly). However, the competitive environment in iron ore production is rational. This coupled with the fact that BHP's iron ore assets are at the lower end of the global cost curve enables BHP to deliver a strong level of profits from this division. Copper is a key input for infrastructure that will help with the global transition to more electrification in countries fed by energy that is sourced from renewable energy sources. Potash is a fertilizer for crops which benefit from rising demand driven by increasing populations and a rising middle class in many countries. These divisions support the long-term earnings growth of the business which we also like.

What does it do?

Brambles is a supply-chain logistics company operating in more than 50 countries. The group specialises in the pooling of unit-load equipment and associated services, primarily the outsourced management of pallets (CHEP).

Why do we own it?

Although Brambles is a capital-intensive business it generates attractive returns on capital. It is difficult for potential competitors to replicate the scale of Brambles' pallet pool and its extensive service centre network. Moreover, there is considerable IP in managing the flow of pallets through the supply chain and keeping control of the assets. We expect sound growth from Brambles for many years to come as the penetration of pooled pallets continues to increase in developed markets and as modern supply chains are established in emerging markets.

What does it do?

CAR owns a network of leading classified advertising websites in Australia and internationally including in South Korea, the United States, and Brazil. This geographic breadth diversifies its earnings base and provides it with a broad runway for future earnings growth.

Why do we own it?

CAR benefits from a wide network-effect moat across its key markets, making it hard for competition to encroach on its dominance. Management has developed a credible track record in replicating CAR’s success in the Australian market in its overseas markets. The company is consequently in a strong position to capitalise on a range of attractive growth prospects in the future.

What does it do?

Cochlear is the global leader in the severe and profound hearing-impaired device market. Cochlear implants allow people who cannot hear receive and process sound and speech.

Why do we own it?

Cochlear has helped over 700,000 recipients of Cochlear Implants hear again. Yet there remains a significant, unmet and addressable need that is expected to continue to underpin long term growth of the business. It has a long term focussed culture of excellence. It spends 12-14% of revenues on research and development each year, looking for the next advancement in helping people hear again. This too will contribute to its future growth longer term.

What does it do?

Commonwealth Bank of Australia (CBA) operates a leading banking franchise in both Australia and New Zealand and has a strong presence in all spheres of retail and business banking. CBA has built a very profitable portfolio of assets and positioned itself to benefit from key growth areas in the Australian economy. The bank also enjoys an enviable scale advantage in gathering deposits, giving it an important source of stable and low-cost funding.

Why do we own it?

The big four Australian banks enjoy a supportive industry structure and wide economic moats. Their scale, capital strength, regulatory expertise, technology, and brands constitute significant barriers to entry for potential competitors, allowing the banks to earn healthy returns on their capital. CBA’s significant share in core Australian lending and deposit gathering should ensure it continues to profit and grow over time.

What does it do?

Credit Corp purchases and then collects, on its own account, portfolios of defaulted debt. These are primarily bought from banks. The company has successfully replicated its Australasian debt buying operation in the US. It has also leveraged its understanding of the sub-prime market to build an Australasian consumer lending business that focusses on credit impaired borrowers.

Why do we own it?

We like Credit Corp's leading market position and strong reputation with Australia’s major banks, which have allowed it a healthy share of the PDL market. The business enjoys a scale advantage versus competitors, has a conservative balance sheet, and is tightly managed. The Australian PDL business is mature but the company's consumer lending business and US PDL operation provide growth opportunities.

What does it do?

CSL is a global leader in the development and manufacture of plasma derived therapies, influenza vaccines, and iron deficiency and nephrology therapies.

Why do we own it?

CSL's therapies address conditions for which drug trials are typically difficult to conduct, giving existing companies with approved therapies a tremendous advantage. As a result, CSL enjoys healthy returns on capital and strong earnings growth over very long product lifecycles. In addition to owning several leading therapies, CSL have historically and continue to invest significant resources in plasma supply and research and development, securing future earnings growth.

What does it do?

Fineos is a leading provider of policy administration systems software to the Life, Accident & Health (LA&H) insurance industry. Its Claims product is used by 7 of the top 10 LA&H insurers in the US and 6 of the top 10 insurers in Australia, as well as the ACC in NZ.

Why do we own it?

LA&H insurers are in the early stages of switching from legacy mainframe centric systems to fully digital solutions like those offered by Fineos. Fineos’s core Claims product is best in class, mission-critical software. Given the quality of its software, and the credibility of its large customer base, it is well-positioned to keep winning contracts and increase penetration within existing clients.

What does it do?

MAAS is a diversified industrial business. It operates four distinct business units: construction materials, civil construction and hire, residential property and commercial property. It operates many quarries and concrete plants across New South Wales, Victoria and Melbourne, and supplies aggregate and concrete to the Australian building industry. It also provides construction, equipment hire and electrical transmission services to major infrastructure and renewable projects across Australia.

Why do we own it?

The location and remaining life of the quarries provides MAAS with a reasonable ‘moat’ and a sustainable competitive advantage. Because of the cost to transport aggregates and the low price-to-weight ratio of aggregates, the location of quarries is very important. The proximity of MAAS' quarries to large civil, residential and commercial construction means MAAS is the lowest cost provider in many regions. It is not easy obtaining permits to build new quarries, nor to expand quarries. This all means MAAS' quarries are very valuable. MAAS is led by a well-regarded and experienced management team, and have deep knowledge of the regional markets that MAAS plays in. There is shareholder alignment across the business with many of the team on the long-term incentive scheme and through that own shares in MAAS. The MAAS team genuinely think like owners and run the company in order to maximise long term shareholder value.

What does it do?

Domiciled in Australia, Macquarie Group is a global financial services company spanning four divisions. The majority of its profit comes from its asset management and commodity & global markets divisions. Macquarie also runs an Australian investment bank as well as a small retail bank.

Why do we own it?

Macquarie’s strong culture and people development, helped by its global scale has been key to its 50+ consecutive years of profitability – an enviable track record. Macquarie develops expertise and focusses its resources on long-term structural growth areas of the economy (such as the growth in green, renewable energy). As such, it is well positioned to continue growing its earnings for many years to come.

What does it do?

National Australia Bank (NAB) operates a leading banking franchise in both Australia and New Zealand and has a strong presence in all spheres of retail and business banking.

Why do we own it?

The big four Australian banks enjoy a supportive industry structure and wide economic moats. Their scale, regulatory expertise, technology and brands constitute significant barriers to entry for potential competitors, allowing the banks to earn healthy returns on their capital.

What does it do?

Next DC is an Australian data centre business. It currently operates 17 data centres across Australia. It has a further 10 new data centre developments underway across Australia, Malaysia, Japan and New Zealand. Its unique proposition is to create a valuable ecosystem within its data centres by assembling a community of customers for whom it makes commercial sense to be in close data proximity.

Why do we own it?

Next DC benefits from the strong secular growth trends in cloud computing, data use, connectivity and more recently AI use. Assisted by these tailwinds, Next DC’s earnings should multiply as the capacity of its existing data centres becomes fully utilised and as the capacity of its new data centres comes on-stream over the next couple of years.

What does it do?

oOh! Media is Australasia’s largest Out of Home advertising company. It has over 37,000 digital and static advertising billboards and screens that can be mainly found in or on roadsides, retail centres, airports, train stations, bus stops, and office towers. This extensive network enables advertisers to get their messages to a large number of people as they move about in the course of their daily lives.

Why do we own it?

The audiences for traditional broadcast media like free-to-air TV and print are shrinking and fragmenting as they are disrupted by new digital media. Against this backdrop, Out of Home advertising remains a very effective broadcast medium as it cannot be avoided by audiences. At the same time, increasing digitalisation of Out of Home sites is enabling more dynamic, real-time messaging by advertisers and more sophisticated audience measurement is confirming to them the returns they are getting on this spend. These factors should enable the Out of Home format to capture an increasing share of the total advertising pie, to the benefit of oOh! Media.

What does it do?

PWR is recognised as a world leader in performance cooling. It manufacturers cooling solutions for global high end motorsport teams such as Formula One and Nascar, high-priced limited run supercar manufacturers such as Aston Martin and Porsche, and more recently emerging technologies like vertical take-off and landing aircraft.

Why do we own it?

PWR has a culture of innovation and invests a meaningful proportion of its revenues back into researching and developing new cooling solutions each year. We think this not only keeps PWR at the forefront of its existing markets but has the potential to broaden PWR’s customer base to include companies in other industries.

What does it do?

REA operates the leading online classified real estate advertising portal in Australia. It also holds significant holdings in similar businesses in the United States and India.

Why do we own it?

In Australia, REA operates in a largely duopolistic market. It benefits from a strong network moat. Close to 100% of real estate agents in Australia advertise for sale and for rent, residential and commercial properties on its portals. Its residential property platform, realestate.com.au, has the largest and most engaged audience in Australia with 131m visits per month, and visitors spending 4x more compared to its nearest competitor. REA is a strong business with attractive growth prospects both domestically and offshore.

What does it do?

ResMed manufactures cloud-connected devices and consumables that are used to treat sleep-disordered breathing (“SDB”) and other respiratory disorders (COPD, neuro-muscular, asthma). It has developed software platforms that use the data from its devices to improve patient outcomes and healthcare ecosystem productivity. ResMed also has a portfolio of Software-as-a-Service businesses that enable healthcare providers to manage patients and deliver services to them as they move between various out-of-hospital settings.

Why do we own it?

ResMed is the global leader in the treatment of SDB. It has a strong competitive position based on its scale, intellectual property and customer captivity. There is a long growth runway in SDB. The addressable market is large (potentially 20%+ of adults have SDB), growing (ageing & obesity) and under-penetrated (even in the US less than 20% of SDB sufferers are treated). As the number of people on treatment rises, ResMed not only benefits from the initial sale of a device but from a recurring stream of consumable sales that grows as its installed device base increases. As a result, the company is highly cash generative. It is led by a very capable and experienced management team.

What does it do?

Rio Tinto is among the most competitive mining companies in the world, with particularly advantageous positions in the copper, iron ore and aluminium markets.

Why do we own it?

Rio Tinto enjoys significant cost advantages over its competitors. Its large mining operations spanning iron ore, copper, aluminium and lithium deliver scale benefits and high-grade ore bodies enhance the sales value of its produce. This advantage sees the company earning superior profits over the commodity cycle and faring better than peers in periods of weakness.

The iron ore industry is mature (i.e. demand by steel makers for iron ore is not growing rapidly). However, the competitive environment in iron ore production is rational. This coupled with the fact that Rio Tinto's iron ore assets are at the lower end of the global cost curve enables Rio Tinto to deliver a strong level of profits from this division. Copper, aluminium and lithium are key inputs for infrastructure that will help with the global transition to more electrification in countries fed by energy that is sourced from renewable energy sources. These divisions support the long-term earnings growth of the business which we also like.

What does it do?

SEEK is the leading online employment marketplace in Australia, New Zealand and Southeast Asia.

Why do we own it?

In Australia and New Zealand SEEK has a strong competitive position by virtue of being "front of mind" for job seekers. Domestically, successful development of new products like its talent search platform will provide high-value new revenue streams. Its international investments give SEEK exposure to faster-growing, less mature employment markets.

What does it do?

WiseTech Global is a logistics software business with a presence in key global regions and key global customers. Their main product, Cargowise One, offers clients a complete suite of logistics services and general business solutions. An early lead in the freight forwarding software domain confers a key technology advantage over competing software systems, increases customer switching costs and establishes a nascent network benefit to participants using its technology.

Why do we own it?

While increasing trade flows are supportive, customers need better technology to help them manage greater supply chain complexity, comply with more onerous regulation and address vociferous competition. WiseTech is an early leader in an industry with low penetration of a clear internet-based technology solution, making for significant growth prospects should the company retain its leading position in the sphere.

What does it do?

Xero is the market leading provider of cloud-based accounting software for small-to medium businesses and their accountants in NZ, Australia and the UK, with growing presences in the US. It also has presence in other markets such as SE Asia and South Africa.

Why do we own it?

Xero’s software is highly rated, and it continues to pioneer innovative new functionality to attract and retain customers. As a result, Xero has a significant share of the cloud-based accounting software market and is growing subscriber numbers strongly. The size of the ultimate opportunity for Xero is significant and there are many years of growth ahead given a lot of the industry still has to migrate to the cloud. With a strong disciplined focus on costs and cash generation, Xero's revenue growth should translate strongly into earnings and free cash flow growth in the future. Xero’s small and medium-size business customers globally have not been easy to acquire but the flip side is, switching costs mean the customer base represents a significant, sustainable competitive advantage.