Global equity markets rose 1.8% over April in USD terms, translating to a +3.1% gain in local terms as the New Zealand Dollar softened. Markets continued their recovery since the start of 2023, gaining 9.8% and 12.8% year-to-date in USD and NZD terms respectively. Mega cap technology companies have driven much of the market’s performance with the Nasdaq 100 index +21.4% year-to-date in USD terms.
Intuitive Surgical was the Global portfolios’ best performing stock in April, rising +17.9% for the month after releasing a favourable earnings report. Intuitive Surgical produces robotic surgical machines that help surgeons provide more accurate and less invasive surgeries, improving outcomes for patients and reducing costs for hospitals. The number of procedures delivered by these machines grew faster than expected during the first quarter of the year, prompting the company to raise their earnings outlook for the rest of the year.
Pulte Homes was another source of outperformance, gaining 15.2% over April after reporting promising first quarter results and receiving more housing orders than the market anticipated. The US market for new homes continues to be more resilient than some market participants expected, bolstering Pulte Homes’ order book while supporting healthy operating results.
Semiconductor manufacturer TSMC was our portfolio’s largest detractor, falling 9.4% over the month. TSMC reported weaker-than-expected earnings, pulling the stock back after a strong rally in prior months. We remain confident in TSMC's long-term earnings power because the chips that run AI software need to be made by TSMC’s factories.
New Zealand & Australian equities
New Zealand’s share market posted a 1.1% return in April as measured by the S&P/NZX 50 Index whilst in Australia the S&P/ASX 200 returned a slightly more robust 1.8%
Mirvac Group, a diversified Australian Real Estate Investment Trust, performed very well in April, increasing 15.9% over the month. Not only was it the Australasian portfolio’s best performer, but it was also the strongest performer in the ASX 100, which measures the largest 100 companies listed in Australia.
Mirvac’s share price was pushed higher by two pieces of news during the month. First, the RBA avoided increasing benchmark interest rates, which led some commentators to speculate that Australia had reached peak interest rates in this tightening cycle. Second, the company released third-quarter operating results and downgraded its earnings forecast. Yes, downgraded earnings! The market took this positively because there was already widespread skepticism that Mirvac could deliver on the optimistic targets they provided in February. The market reacted positively when the downgrade was not as bad as many had feared.
Arvida also performed exceptionally well, increasing 11.8% in April. Arvida has struggled so far in 2023, suffering from a weak housing market, a tough labour market and insufficient aged care funding from the Government. However, the company reported better-than-expected retirement unit sales in its April investor newsletter, providing some hope that we may have seen the worst. Arvida is still trading at just half of its book value (a valuation metric that compares the share price to the value of those shares according to the company’s financial accounts), which represents a significant discount to where the shares have historically traded.
Summerset Group, another aged care name, was the Australasian portfolio’s worst performer. The company provided an upbeat assessment of its year-to-date retirement unit sales when they released their full year financial results in February. As such, investors were surprised, and disappointed, when the company released weak first quarter sales results in April. The company’s share price tumbled 7.5% on the implication that Summerset’s strong track record could be slipping, especially given the stock’s price premium relative to other aged care providers.