Welcome to the JUNO Market Update.
In this video, Gordon Gomes from the Client Services team speaks to JUNO CEO + Founder Mike Taylor and Chief Investment Officer Mark Devcich about what has been happening in markets this month and answer questions sent in by investors.
- When will markets recover?
- What are two JUNO stocks that have performed steadily during this volatile period?
- What are the investment team doing to reduce the impact of market volatility? Are they raising cash levels or using any hedging?
We have also provided a transcript.
Thanks for watching.
JUNO Market Update 22 Feb 2022 from JUNO Funds on Vimeo.
Gordon Gomes: Welcome to the JUNO KiwiSaver monthly update. My name is Gordon Gomes and I’m from the client services team. You may have heard my voice over the phone, or even received a couple of my emails. With me is Founder and CEO Mike Taylor, and Chief Investment Officer Mark Devcich. And we are here to answer a few of our investors’ questions. Welcome to you both.
To kick things off Mike, we have a question here from Ajay. With volatility continuing into February, when do you think markets will recover?
Mike Taylor: Thanks Ajay, that’s a good question. Volatility feels like it's here to stay for the moment. The reason I say that is that a couple of incidents that sparked off the volatility this year, still remain unresolved. So we've got inflation trending higher. We've got interest rates going higher. We've got energy costs going up. It's over $3 a litre now to fill up your car. And we've also got this potential for a war in Eastern Europe which is sort of right on the brink as we speak. So none of these things are resolved and the market won't settle down until we have some clear answers on those points really.
GG: Thanks, Mike. And on to you Mark, Jen wants to know, what are two JUNO stocks that have performed steadily throughout this period?
Mark Devcich: Thanks, Gordon. It's been a difficult period to find stocks that have done well given how poorly the markets have performed yet year to date, but I'll go through a couple of examples in the portfolio that are actually up slightly year to date. So the first one is TSMC. TSMC is a contract manufacturer in the semiconductor industry. It's based in Taiwan. And it actually has 58% global market share so it is by far the dominant leader and because it’s the dominant leader, it's got cost advantages, and it has built up a lot of IP over the years. In fact, over the last 10 years the stock price has gone up roughly 10 times. It’s grown from a market cap of about US$60 billion to nearly US$600 billion today. So that's one company that we’ve held in the portfolio for about a year now and it has actually performed pretty well for us and we think with more and more devices being connected, having chips in them and TSMC being the leader, it will continue to do very well.
Another example of some companies - I put these two together, we own both of them - are Visa and MasterCard. These two have done well, slightly up year to date. They had a bit of a tougher last year but we think…. the original reason why we bought these is because we thought that they had a really good hedge against inflation and they were good reopening plays because as people go back to travelling, using their credit cards, debit cards offshore, Visa and MasterCard actually made a lot of money out of those cross border-transactions. They are roughly about eight times more profitable than when you're spending in your home country. And then also with inflation, like Mike was talking about, as things get more expensive, Visa and MasterCard basically just clip the ticket on every transaction that you do. So they take a percentage, a very small percentage, of every transaction and it's a great way to have a hedge against inflation.
I guess the last point why we like these two companies is they're both very, very dominant in payments and there’s still this big move away from cash to card. So Visa estimates about 43% of total personal consumption is still in cash or cheque and as we saw with the pandemic, there's been a big move away from using cash due to hygiene reasons. I know I've been tapping my Visa and MasterCard, a lot more than I used to. So that trend has still got a long way to go. And these two companies are basically the best place to take advantage of that trend towards electronic payments, away from cash.
GG: Thanks for that Mark. Mike, a few of our clients want to know what the investment team is doing to reduce the impact of market volatility? Are you looking at raising cash levels or using any hedging?
MT: That’s another good question. We discuss this as an investment team, at the moment quite regularly, often daily, between myself and Mark, or normally a couple of times a week formally. So what we've done since the market sell-off commenced, we’ve reduced our level of exposure to the market. So we've done that by putting a market hedge on. So if we look at the JUNO Growth Fund at the moment, before the volatility started, we had about 15% cash. Now our exposure to the market is a lot less, so we have around, either hedged or in cash, about 34%-35% of the fund. So two thirds of it is invested and one third is cash or hedged. So we've moved to protect investors’ portfolios just while we kind of wait until some of these things resolve.
GG: Great. Thank you, Mike. And thanks as well to you Mark. If you have any questions you'd like answered on future videos, please send them through to [email protected] Thank you guys for watching, and we'll see you next time.
Information correct as at February 2022. Pie Funds Management Limited is the issuer and manager of the JUNO KiwiSaver Scheme. Click here for our Product Disclosure Statement. Any advice is given by Pie Funds Management Limited, and is general only. It relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees if you act on any advice. As manager of the Scheme we receive monthly fees that are determined by your balance and whether you are 13 years or over. We will benefit financially if you invest in our products. We manage any conflicts of interest via an internal compliance framework designed to ensure we meet our duties to you. For information about the advice we can provide, our duties and complaint process and how disputes can be resolved, visit www.junofunds.co.nz. All content is correct at time of publication date, unless otherwise indicated. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary. Please let us know if you would like a hard copy of this disclosure information.