Rotation from ‘reopening’ to ‘inflation winners’

The trend towards the ‘re-opening’ theme is coming to an end, according to Munro Partners, as companies which sat outside of the theme performed better than expected.

In a quarterly outlook about its $1.3 billion Global Growth fund, the firm said there was a trend moving out of the reopening theme such as travel and leisure and now into ‘inflation winners’.

There has been much speculation about the threat of rising inflation, especially in the US where inflation is at the highest level since 2008 and possible reactions by central banks.

“Many of the areas of interest that contributed positively to fund performance for the quarter were supposedly in the wrong part of the market for ‘reopening’. This would suggest this is the market starting to refocus on earnings growth over the longer term and that the leading growth stocks will re-assert themselves over time.

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“This is particularly clear in our digital areas of interest where growth accelerated during COVID-19 and there is scant evidence that this will slow as workers and consumers alike look to retain the conveniences they discovered.

It said the fund had a more balanced portfolio than usual by areas of interest and stock valuations as it was watching for a possible hike by the Federal Reserve.

Its largest area of interest was digital enterprise at 14.9% followed by climate, which was a weaker performer during the quarter and positive contributors came from computing firm Nvidia, e-commerce firm Hellofresh and tech mega-cap Microsoft.

The Munro Global Growth fund had returned 23% over one year to 30 June, according to FE Analytics, versus returns of 15.5% by the absolute return sector within the Australian Core Strategies universe.