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Monthly Report International Fund July 2022


International Fund July Monthly Report

July was a big up month for stock markets, with our benchmark index up 5.6%. The Forager International Share Fund lagged a little, up 4.5%, with many quarterly results still to be reported.

Online travel technology firm (SWX:LMN) fell 33% in July after Swiss authorities launched an investigation into the company. Four executives have been held in remand, including the CEO and founder Fabio Cannavale and Chief Operating Officer Andrea Bertoli. They’re accused of fraud related to COVID-19 assistance received by the company.

Most of the legal ire here seems directed at key individuals rather than the company. But won’t escape scot-free. This is not a small matter, and speaks to some of the governance issues that we’ve highlighted but clearly underweighted over the past year. At the least, a discount needs to be applied to our valuation.

But the market has overreacted. For context, the company took a total of CHF28.5 million in COVID support over the past three years. The Public Prosecutor’s Office has blocked a total of CHF7 million in the company’s bank accounts, only a portion of the total in those accounts, so it may be indicative of the scale of remediations in question. At one point,’s market capitalisation was down more than CHF100m.

The company’s announcements on the matter have moved swiftly from “confident of no wrongdoing” to distancing the company from the accused. An interim CEO has been appointed and, importantly, the board has resolved to launch a search for a permanent replacement.

Subsequent to month end, the company reported its result for the half year ended 30 June. Despite a slow start to the year due to the Omicron variant, total sales of €155m for the half fell just 5% short of 2019’s pre-covid numbers, and net profit of €13.2m eclipsed 2019’s €11.6m. The second quarter was a record one for the company, with revenue up 8% on 2019 and net profit up 60%, thanks to cost cutting and a shift in business mix towards dynamic packaging away from flights.

A good Q3 result seems likely, despite impacts from European airport havoc that you may have read about. On the results call, management confirmed they expect the summer season to be elongated this year. At least that part of our thesis is holding up well, and we’re watching developments closely.

In better news, energy drinks company Celsius Holdings (NASDAQ: CELH) rose 36% over the month on no apparent news. The reason became apparent after month end, though (just a coincidence, we’re sure). Celsius announced a long-term distribution agreement with PepsiCo (NASDAQ:PEP). This deal will dramatically expand distribution potential for Celsius’ products. Pepsi will take a stake in the business via the investment of $550m in convertible preferred stock which equates to an estimated 8.5% ownership on conversion. For context, that $550m is more than the company’s entire market valuation at the time of Forager’s first investment. The stock has risen meaningfully further since month end, and the Fund has been reducing its investment.

June quarter results started filtering in later in July. They ranged from below expectations to great. Turning Point Brands (NYSE:TPB) reported overall sales declining 16% versus the same period last year. Some of that was expected, with sales of its “Next Generation” products plummeting for most of the past year due to a regulatory quagmire. But demand for its traditional products like Zig-Zag and Stoker also seems to have waned (albeit still growing). It was only a quarter, but it was a mediocre result.

Meta Platforms (NASDAQ:META), owner of Facebook and Instagram, produced a middle-of-the-road result. The number of people regularly using its products increased and new formats on both Instagram and Facebook seem to be gaining traction (albeit accompanied by plenty of Kardashian whinging). Revenue from advertisers, though, suffered thanks to a general slowdown and competition from TikTok. The rest of 2022 won’t get easier but Meta shares are priced like it will never grow again.

Lastly, aesthetic procedure machine manufacturer InMode (NASDAQ: INMD) produced an outstanding second quarter result, with sales up 30% and a slight increase to an already rosy outlook for the full year. This business could face headwinds in a bad economic environment, but we’ve added to the investment over the past month as the results are largely confirming our thesis.