International Equity Strategies – Q2 & Six-Month Review
The Pembroke International Growth Fund outpaced the MSCI ACWI ex-US Small Cap Index during the quarter and year to date periods ended June 30. The fund’s emphasis on high-quality growth companies with strong financial positions bolstered relative performance amid the COVID-19 pandemic-driven market correction in March, while contributing to subsequent outperformance as financial markets strongly recovered in the April-June period.
Stock selection within the industrials and information technology sectors were key drivers of outperformance during the second quarter and six-month period ended June 30. The overweighting to information technology stocks and underweightings to energy and real estate stocks also contributed positively to relative performance.
Within industrials, Japanese holdings Nihon M&A Center and Monotaro were top contributors during both the quarter and six-month periods. Nihon M&A Center is a high-quality Japanese growth company that provides advisory services to small and medium-size enterprises (SMEs) facing succession-oriented challenges. It is led by an entrepreneurial management team that has built an attractive network of national relationships aimed at identifying buyers and sellers and sourcing transactions. Maintenance, repair and operations company Monotaro offers over 10m products across seven industrial categories using a single transparent price for each product and overnight delivery. The company uses its extensive customer database to predict client order trends, apply targeted promotions, and manage inventory.
Within the information technology sector, Chinese semiconductor company Silergy was the top performer for the quarter and six-month periods. Silergy is a fabless analog semiconductor company with expertise in power management integrated circuits. Its competitive advantage is its ability to design products with superior performance at a low cost.
Partially offsetting these positive contributors were negative stock selection in healthcare and the underweighting to materials stocks. Within the healthcare sector, Germany-based Carl Zeiss Meditec was the largest detractor during the quarter and six-month periods. Carl Zeiss is one of the leading suppliers of surgical tools and equipment for the diagnosis and treatment of ophthalmic conditions. The company has a history of innovation that has a provided them a strong platform from which to expand into lucrative adjacencies such as intraocular lens (IOLs), the largest market within surgical ophthalmology. The share price was negatively impacted by COVID-19 lockdowns and weak patient volumes.
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Disclaimer
This report is for the purpose of providing some insight into Pembroke and the Pembroke funds. Past performance is not indicative of future returns. Any securities listed herein, are for informational purposes only and are not intended and should not be construed as investment advice nor is it a recommendation to buy or sell any particular security. Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Pembroke seeks to ensure that the content of this document is correct and up to date but does not guarantee that the content is accurate and complete and does not assume any responsibility for this. Pembroke is not responsible for decisions or actions taken or made on the basis of information contained in this document.
