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 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.

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 provide 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 by Tysers, a large London-based wholesale insurance broker. AUB is also developing a UK general insurance broking network.

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?

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, BHP’s largest division in terms of earnings, 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 intellectual property in managing the flow of pallets through the supply chain and keeping control of the assets. We expect sound growth from Brambles to continue 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 750,000 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?

As Australia’s largest bank, 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, 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. The company has recently begun building a sub-prime lending business in the UK.

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 Australian and UK consumer lending businesses and its 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 has historically and continues to invest significant resources in plasma supply and research and development, which should help drive earnings growth in the future.

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?

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 and fast-growing retail bank.

Why do we own it?

Macquarie’s strong entrepreneurial culture and people development, helped by its scale in particularly its commodity & global markets division 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 for example the growth in green, renewable energy and digital infrastructure). 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 retail and especially business banking.

Why do we own it?

The big four Australian banks enjoy a supportive industry structure and wide economic moats. Their scale, 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 11 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 Artificial Intelligence 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 30,000 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, 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 146m visits per month, 3.6x more compared to its nearest competitor. REA is a strong business with attractive growth prospects.

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.

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 that 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, and these commodities benefit from the increased need for electrification globally in part helped by the strong structural growth in artificial intelligence related infrastructure (including data centres and affiliated electrical energy generation). 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 servicing global logistics customers. Their software offers clients a complete suite of logistics services. A strong lead in freight forwarding software confers a key technology advantage over competing software systems, increases customer switching costs and has established a network benefit to participants using its technology.

Why do we own it?

While increasing trade flows are supportive, their software helps them manage greater supply chain complexity, comply with strict regulation in an efficient manner. WiseTech is a leader in an industry with low penetration of a digital technology solution which has been enhanced with artificial intelligence related features. In helping customers streamline the efficiency of logistics transactions, the tracking of freight movements, record keeping and the complex regulatory requirements that have to be met when moving goods across borders, WiseTech’s products provides a valuable service to its clients. The logistics industry is relatively early in automating business processes (and using artificial intelligence), meaning there is a long runway of earnings growth ahead for WiseTech should it retain its leading market position.

What does it do?

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

Why do we own it?

Xero’s software is trusted by customers. As a result, Xero has a significant share of the accounting software market and is growing subscriber numbers strongly. Xero has many years of growth ahead as businesses continue to digitise their accounting and payments processes. With a disciplined focus on costs and cash generation, Xero's revenue growth should translate strongly into free cash flow growth in the future. Xero’s software is integral to business operations, switching costs are therefore high and this acts as a strong competitive advantage. Xero’s scale places it in a strong position to embed artificial intelligence related features into its software in a robust, secure way. These features in turn stand to increase the efficiency for businesses using Xero’s software, further enhancing the value Xero can offer its customers.