Ethan C. Messenger, Guest Editor
I first heard about this fund when a wholesaler came to pitch at the financial advisory firm where I work. The entire audience of financial advisors sat fixated, and not on their meals as was usually the case. The man we watched with such intensity was Jonas M. Krumplys (CFA) manager for a new mutual fund developed by Ivy Investment Management. Krumplys has been in the industry for 29 years and shows no signs of slowing down, based primarily on the sheer giddiness he displayed at his presentation. The fund I have been describing is Ivy’s Asset Strategy New Opportunities Fund (INOAX) an "A" share specialty fund best described as quasi-emerging-markets. Quasi because of the large holdings it has in the US, totaling 17.6%.
Why look into in INOAX's holdings?
While the fund is new, created in May, 2010, it has shown some promising results this past year. The life of the fund has seen a 34.60% increase, that is not factoring in the front-end load (5.75%). Therefore, the fund has returned 26.86% to investors since inception. I know many of you may be saying any fund can have a great year, especially in this current upswing. That may be true, but consider the following. This fund returned 34.60%, the S&P 500 only returned 18.71%. That equates to a 15.89% increase for INOAX over the S&P index, putting it in the second percentile for performance in the one-year category.
Still not convinced? That is to be expected. Here are a few more figures for your consideration. If you were to have invested $10,000 at the inception of the fund in May, 2010, and keep in mind a quarterly dividend, you would currently have $14,824, a nearly 50% increase. But, once again these are figures and simply show performance, but why buy this particular fund?
One of the most impressive facets of this fund is its incredible diversity. The fund’s primary allocations lie in foreign stock, totaling 79.90%. Its top three sector allocations are in consumer discretionary with 23.9%, in information technology with 17.4%, and in financials with 14.3%. Globally the fund is investing in areas of incredible promise, with Brazil topping their allocation with 18.7%, with other notables namely South Korea and China at 9.8% and 9.4% respectively. The combination of a focus in consumer discretionary and focus in such emerging markets as Brazil, China, and South Korea is really what peaked my interest in the fund. It is also the incredible diversity in holdings, catering to mid-cap growth oriented companies.
But a mutual fund is nothing more than a collection of holdings, and I have chosen of their top holdings I deem of particular interest.
This fund’s top holding amounts to only 4.2%, and it is none other than Kia Motors. For 2010 Kia showed some impressive numbers with revenue increasing to $21.26 billion, net income increasing to $2.06 billion, and total assets increasing to $17 billion. Sales are up across the board, and this multinational corporation is leaving no market untapped. They anticipate an increase in sale of over 50% in Indonesian markets in the coming year. Kia Motors America (OTC:KIMTF), a distribution and marketing arm for the company in the U.S., is posting record highs, breaking all previous monthly sales records during March, and simultaneously having the best quarter in company history. One of the most impressive statistics is the consistently increasing market share Kia Motors has been able to carve in its U.S. market, with 2010 marking the 16 consecutive year that it has seen increased market share. Kia Motors has yielded a 96.16% return on the year for the fund.
SINA Corporation (SINA) amounts to 3.5% of their holdings and is second only to Kia Motors at 4.2%. SINA, a Chinese based online media company, has over 100 million users worldwide. It provides its services through five primary outlets that range in function from providing news and mobile content, to social networking services and games. With a rapidly expanding Chinese middle-class SINA can expect to grow for years, making it an excellent investment by itself. SINA has yielded a 36.16% return on the year for the fund.
MercadoLibre (MELI) is a small-cap ($3.88B) e-commerce corporation, currently trading at 87.81, up $1.39 at mid-day trading. MELI is eBay’s (EBAY) Latin American partner, eBay owning an 18.37% share. It operates much in the same way eBay does with its own unique auction and payment systems. It is present in thirteen countries throughout South and Central America and the Caribbean. Brazil is an amazing emerging market to be in for a number of reasons. For one it is not suffering nearly as harshly from the neoliberal policies that have ravaged countries such as Bolivia and Columbia. I see this as both allowing a middle class to grow as well as participate in relatively new opportunities such as e-commerce. I find it to be an exciting long-term holding. MELI has yielded a YTD return of 22.28% return for the fund.
Rossi Residential S.A. (OTCPK:RSRZY) is a Brazilian based company involved in construction and real estate. It currently accounts for 2.4% of INOAX’s holdings. Much like MercadoLibre I find Rossi to be an excellent holding in a country where a middle-class is going to expanding, and is expanding. This means increased construction in the housing market to meet rising demand. Much of this is reflected in Rossi’s 2010 figures, with an increase in revenue to $1.6 billion, and an increase in net income to $222.1 million.