Last week, I wrote to you about the coronavirus and the impact it’s having on global markets right now. As we’re sure you’ve seen for yourself, there’s been a lot of volatility in the past few weeks, and this may well continue for a while yet.
In that newsletter, we discussed how this volatility doesn’t change the way we do things at Spaceship; we know the markets go up and down at times.
Having said that, every quarter, we take a look at the stocks in our Spaceship Universe Portfolio and review whether they continue to meet our Where the World is Going (WWG) criteria — that is, we think they are forward-thinking companies with sustainable competitive advantages that will benefit from future trends.
Due to what’s going on in the world right now, we felt there were a number of companies that no longer met our WWG criteria, and so we removed them from the Spaceship Universe Portfolio. In this newsletter, we talk about why we sold: ASX, Booking.com, Computershare, Domain, Hub24, Naspers, Netwealth, and Webjet.
We’ll continue to keep you up to date with changes in the portfolio including the details of any new companies we’re buying.
Booking.com and Webjet
The travel industry, in particular, is reeling from the coronavirus pandemic.
While we believe travel stocks will recover eventually, we felt Booking.com and Webjet faced separate risks. Google has been moving up the “search funnel” when it comes to travel; you can actually search for flights and accommodation directly through the Google search engine, compare a list of the best options, and then head directly to the supplier’s website.
Google is a formidable competitor, and we don’t feel Booking.com and Webjet can necessarily go the distance, even if you removed coronavirus from the equation.
Computershare, Hub24 and Netwealth
When Computershare released its results for the first half of the 2019-20 financial year, we had some concerns — and that was just before the market volatility set in.
Essentially, Computershare had accounted for interest rate cuts in Australia and the United Kingdom, but after the United States and Canada cut interest rates, Computershare decided it had to revise its earnings guidance. As such, we decided to sell.
Hub24 and Netwealth have been similarly impacted by the low interest rate environment.
These companies make an interest margin on client balances. However, as interest rates go down, earnings do too. While Hub24 and Netwealth are gaining market share from larger platforms, this has been offset by the fact financial advisors have been leaving the industry due to regulatory changes. In other words, future growth is looking slow.
Last year, we explained the main reason for holding Naspers was because it gave us an “easy way in” to holding Tencent. However, last year Naspers decided to partially spin off its global internet technology assets, including its stake in Tencent, into a company called Prosus.
Once that happened, we no longer felt we could make a case for holding Naspers (or Prosus), especially as the new corporate structure had made things more complex than before.
You’ve probably heard of the ASX. It is, after all, only Australia’s largest stock exchange!
Despite this impressive title, we feel the ASX (as a stock) no longer boasts the growth prospects it once did. This is partially because it is strongly tied to banking and resources stocks.
We had hoped that its technology stocks would help it increase growth, but given the correction we are currently experiencing, we no longer believe that to be the case.
The housing market had started to rebound recently. In fact, house prices in Sydney and Melbourne were growing at their fastest rate in three years ahead of the coronavirus outbreak.
However, Domain (as a business) comes in second to RealEstate.com.au.
Given we already have RealEstate.com.au (REA Group) in the Spaceship Universe Portfolio, we decided to keep the stronger position and sell out of Domain.
Spaceship Index Portfolio
For customers in the Spaceship Index Portfolio, things are a little different.
The Spaceship Index Portfolio portfolio is made up of around 100 of some of the largest ASX listed companies by market capitalisation, and around 100 of some of the largest global companies by market capitalisation.
If a company moves in or out of the Spaceship Index Portfolio, it will be because its market capitalisation has changed, not because we have made the decision to buy or sell it.
We know it’s a tricky time to be an investor, but it’s important to remember that at Spaceship, we believe strongly in the value of long-term investing.
We have a minimum suggested timeframe of five years for holding any investment in a Spaceship Voyager fund. Generally, when equity investments are held for longer periods they tend to exhibit lower volatility than those held for shorter periods. But remember: past performance is not a guide to, or reliable indicator of, future performance.
The Spaceship Universe Portfolio and the Spaceship Index Portfolio invests in REA Group at the time of writing.
Important! We’re sharing with you our thoughts on the companies in which Spaceship Voyager invests for your informational purposes only. We think it’s important (and interesting!) to let you know what’s happening with Spaceship Voyager’s investments. However, we are not making recommendations to buy or sell holdings in a specific company. Past performance isn’t a reliable indicator or guarantee of future performance.