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Monthly Report International Fund January 2023


International Fund January Monthly Report

Global share markets rose over January, with the MSCI ACWI IMI index up 3.3% in Australian dollars, despite enduring a headwind from a strong Australian currency. The unit price for the Forager International Shares Fund rose 7.0%, with those stocks most brutalised by 2022 finally catching some interest.

By the time Meta Platforms (Nasdaq:META) reached its low point in November it had fallen a stunning 74% from the start of 2022. Today, it’s up 69% from that low and 24% during January alone.

It’s a similar story for other beaten-down portfolio investments. Open Lending (NASDAQ:LPRO), a tech company that facilitates loans between lending partners and “near prime” borrowers in the US, fell 70% in 2022. Its share price rose 30% in January. Fellow 2022 losers Installed Building Products (NYSE:IBP), Fathom Holdings (Nasdaq:FTHM) and Cryoport (Nasdaq:CYRX) rose 29%, 26% and 32% for the month.

Over in Europe, (SWX:LMN) began the arduous process of reputational recovery from its misuse of public Covid relief funds in Switzerland. In December, shareholders agreed to a clean sweep of the entire board of directors and the appointment of a new CEO. The new board quickly and wisely decided to accept rather than appeal the Swiss State Secretariat for Economic Affairs’ decision that it must repay the full CHF29m in relief funds it received over the pandemic.

Flughafen Wien (WBAG:FLU), the owner of Vienna Airport, received a partial takeover offer earlier in 2022. Our dissatisfaction over both process and price was expressed in a letter to the board in June 2022. Later, Austrian regulators investigated the bid which thankfully slowed down the process. While not vetoing the bid itself, the regulator laid down some significant constraints that will prevent IFM from cementing control, including limiting its board representation to 2 seats (out of 10). As expected, the airport’s financial results have recovered nicely in the meantime, the board has foreshadowed declaring a dividend for the 2022 financial year and the stock price has moved firmly north of IFM’s lowball offer. We expect a low takeup and no great deterioration in the (already terrible) daily liquidity in the stock.

UK used car dealer Motorpoint (LSE:MOTR) released a disappointing third-quarter trading update. December quarter sales were down 9% on the same period last year. The near-new used car market in which Motorpoint operates (cars 0-4 years old) is still dealing with a paucity of inventory caused by hamstrung new car production over the past few years. The company cited falling gross profit per unit and, while undisclosed, we suspect it made a small net loss during the quarter. The company “expects to remain profitable for the full year”. The turnaround is dependent on wider UK economic conditions and a normalisation of price and volume in the used car market. It may take a while. A return to year-on-year volume growth in December and January was a small bright spot. Somewhat brighter were the recent disclosures from online-only competitor Cazoo (NYSE:CZOO). Desperately needing to plug its cash bleed, the former market darling outlined plans for layoffs and site closures. Contrasting sharply with the immense growth it’s been reporting recently, Cazoo now expects to sell significantly fewer used cars in 2023 than 2022. It’s a massive waiving of the white flag which should be a benefit to Motorpoint.

While it is nice to see the portfolio performing better after a difficult 2022 calendar year, most of the Fund’s investments are yet to release their results for the December period. Share prices will rise and fall with investor sentiment but long-term value is created from profit and cashflow. On that front, we will have more to say after February and March.