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Franklin Templeton Global Growth and Value Fund - News
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FT Global Growth and Value comment - Mar 11
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Tuesday, 14 June 2011
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Fund Manager Comment
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Despite challenges, global economic growth and corporate profitability remained robust during the quarter and stocks rose, albeit amid heightened volatility. For the quarter ended 31 March 2011, the fund rose 4.58% (net in U.S. dollars). The fund's benchmark, the Morgan Stanley Capital International (MSCI) All Country (AC) World Index, rose 4.53% (also in U.S. dollars). Stock selection in the information technology, consumer discretionary and materials sectors contributed to relative performance for the quarter. Conversely, stock selection in the industrials, financials and consumer staples sectors detracted. The fund managers added a number of stocks that met their investment criteria over the quarter. The Franklin Equity GroupTM focuses on companies they believe offer high-quality, sustainable growth; Templeton's Global Equity Group employs a value-oriented, long-term approach. Looking ahead, corporate profitability appears buoyant and economic leading indicators in key economies remain supportive to equity markets.
Market Review
Global equities rose for the third consecutive quarter in the first three months of 2011 despite unfolding events that posed significant challenges to the two-year-old rally. First, a wave of unrest across the Arab world toppled sitting governments in Tunisia and Egypt and sparked a violent conflict in Libya. Then, on 11 March, Japan suffered its largest earthquake in recorded history, a 9.0 magnitude temblor, followed by a 10-meter tsunami that left nearly 30,000 dead or missing. The tragedy was compounded by an unfolding nuclear disaster at the crippled Fukushima Daiichi plant, and Japan's Nikkei Index plummeted nearly 20% in a matter of days before partially recovering losses. In addition, the European sovereign debt crisis deepened in March as Portugal failed to pass an austerity budget, its prime minister resigned, and rating agencies downgraded the country's debt. Meanwhile, in the United States, another protracted budget battle nearly shut down the government at quarter-end. Despite these challenges, global economic growth and corporate profitability remained robust during the period and stocks rose, albeit amid heightened volatility. The price of oil hit its highest levels in over two years as turmoil in the Middle East and North Africa (MENA) region contributed to rising commodity inflation. The U.S. dollar fell against the euro and commodity currencies, while the yen surged in the aftermath of the earthquake before a globally coordinated intervention reversed its rally.
Performance Review and Contributors to Performance
FTIF Franklin Templeton Global Growth and Value Fund is a master account that invests equally in two actively managed subaccounts, one that follows a "growth" strategy and the other a "value" strategy. Underpinning these strategies are two U.S.-registered Franklin Templeton retail funds: Franklin Growth Fund, which follows a growth-oriented strategy, and Templeton Growth Fund, Inc., which follows a value-oriented strategy. The master account aims to maintain equal exposure to growth and value through constant monitoring and an automatic rebalancing of portfolios at the end of each quarter. Stock selection in the information technology, consumer discretionary and materials sectors contributed to relative performance for the quarter. In information technology, a position in MercadoLibre, an online commerce platform in Latin America, benefited performance. During the period, the company experienced robust growth in revenues and net income, as well as a notable return on equity. A position in priceline.com, an online travel company, also benefited performance. During the period, the world's largest online travel agency by market value forecast first-quarter earnings that topped analysts' estimates. It credited much of the rise to projections that travel bookings will increase as much as 50% in the coming year. Within the materials sector, shares of Syngenta, an agribusiness operating in the crop protection and seed businesses, appreciated through the period. Its shares benefited from the cyclical nature of the company's business as the beginning of planting season in the Northern Hemisphere got underway and commodity prices increased. Conversely, stock selection in the industrials, financials and consumer staples sectors detracted from relative performance for the quarter. Within the financials sector, a position in hedge-fund manager Man Group weighed on results. Its shares fell following the company's announcement that it sold its stake in rival hedge fund manager BlueCrest. Shares of U.S. IT business Cisco Systems also declined during the quarter after the company reported lower-than-expected profit margins and provided a disappointing outlook. However, we believe Cisco's longer-term outlook remains positive as it should benefit from continued strong growth in Internet protocol (IP) traffic, expansion into new adjacent product areas, growth in emerging-markets network infrastructure and generous share repurchases. Shanghai Electric was another top detractor. The share price of Shanghai Electric, a leading power equipment manufacturer, corrected after a year of strong performance due to concerns that China might scale back its plans to develop nuclear power in response to Japan's nuclear incident. In addition, demand for thermal power is slowing, price competition is intensifying, and raw materials costs are rising. However, China's demand for power infrastructure remains strong, and we believe Shanghai Electric is well positioned to participate in this growth.
Strategy and Activity
The fund managers added a number of stocks that met their investment criteria over the quarter. The Franklin Equity Group focuses on companies they believe offer high-quality, sustainable growth, whereas Templeton's Global Equity Group employs a value-oriented, long-term approach.
Investment Outlook
At first glance, the market's recent fortitude in the face of heightened volatility may seem surprising. Yet, in our view, equities are fundamentally discounting mechanisms that represent the current value of estimated future cash flows, and we believe it is unlikely that lost Japanese economic output or lost Libyan oil production will materially impair structural profitability for the majority of global companies. That said, corporate profitability appears buoyant and economic leading indicators in key economies remain supportive to equity markets.
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FT Global Growth and Value comment - Jun 10
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Thursday, 26 August 2010
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Fund Manager Comment
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First-quarter equity market gains were reversed as concerns mounted among investors about the European sovereign debt crisis and the sustainability of the U.S. economic recovery.
For the quarter ended 30 June 2010, the fund fell 12.27% (net in U.S. dollars). The fund's benchmark, the MSCI All Country World Index, fell 11.96% (also in dollars).
An underweighting in materials, as well as stock selection in the sector, contributed to relative performance for the quarter. Stock selection in health care and utilities, however, detracted from relative performance for the quarter, as did an underweighting in consumer staples.
The fund managers added a number of stocks that met their investment criteria over the quarter.
Despite the recent return of volatility and anxiety, we still firmly believe that disciplined investors with a long-term horizon can potentially benefit from the current market environment.
Market Review
Equity markets saw first-quarter gains reversed as concerns about the security of European debt and the sustainability of the global economic recovery offset solid corporate results. Moves by the European Union and the International Monetary Fund to support troubled southern European economies failed to fully convince investors who remained wary of the area's debt and the financial institutions exposed to it. Economic releases and corporate earnings forecasts were supportive for most of the quarter, but they showed signs of strain during the latter part of June as investors became uneasy about progress in the U.S. and China. Commodity prices drifted, while concerns about financial stability pushed up short-term interest rates, although bond markets outside southern Europe strengthened. In currency markets, the yen was strong and the euro weak. The somber market mood benefited defensive stocks as telecommunications and consumer staples outperformed, while energy, materials and financials came under pressure.
Performance Review and Contributors to Performance
FTIF Franklin Templeton Global Growth and Value Fund is a master account that invests equally in two actively managed sub-accounts, one that follows a "growth" strategy and the other a "value" strategy. Underpinning these strategies are two U.S.-registered Franklin Templeton retail funds. These are Templeton Growth Fund, Inc., which follows a value-oriented strategy, and Franklin Growth Fund, which follows a growth-oriented strategy. The master account aims to maintain equal exposure to value and growth through constant monitoring and an automatic rebalancing of portfolios at the end of each quarter.
An underweighting in materials, as well as stock selection in the sector, contributed to relative performance for the quarter. Mining stocks suffered from fears of a cooling in Chinese industrial demand and unease about proposed tax hikes in Australia. An overweighting in telecommunications also contributed to relative performance. Ericsson was a top contributor, rising during the quarter after the company reported better-than-expected profit margins despite weaker-than-expected sales. Shares of American Tower Corp., a wireless and broadcast telecommunications infrastructure company, benefited from the demand for the additional bandwidth needed in smartphone technologies. Man Group, a London-based investment management company, benefited from investor confidence in its purchase of GLG, a fundamental manager, during the period, which analysts expect to help accelerate Man's growth in the U.S.
Stock selection in health care and utilities detracted from relative performance for the quarter, as did an underweighting in consumer staples. Shares of Gilead Sciences Inc. were negatively impacted by developments in Europe as governments cut prices on a variety of health care-related expenditures. Although this was expected by the market and considered in our longer-term analysis, the news flow impacted returns for the quarter. Esprit Holdings Ltd., which is engaged in wholesale and retail distribution and licensing of fashion and life-style products, was also negatively impacted by its exposure to European markets, as a significant portion of its business is derived from the region. Ongoing concerns about the trajectory of the economic recovery in Europe weighed on returns. Additionally, investors re-assessed the strength and timing of the company's wholesale sales recovery and performance of company owned stores, factoring in a negative margin impact from ongoing company deleveraging and higher overall input costs.
Strategy & Activity
The fund managers added a number of stocks that met their investment criteria over the quarter. Templeton's Global Equity Group employs a value-oriented long-term approach, while the Franklin Equity Group focuses on companies they believe offer high-quality, sustainable growth.
Investment Outlook
As we enter the third quarter of 2010, we believe stock prices remain primarily influenced by macroeconomic forces rather than the longer-term valuation and earnings fundamentals of specific companies. While current imbalances in the global financial system represent a formidable challenge for policymakers and equity investors, corporate fundamentals have remained strong, excess corporate leverage has been reduced, valuations continue to be selectively attractive and emerging markets still represent powerful global growth catalysts for companies in a number of industries in our view. Despite the recent return of volatility and anxiety, we still firmly believe that disciplined investors with a long-term horizon can potentially benefit from the current market environment.
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