AVI Global Trust (AGT) says its net asset value (NAV) fell by 9.8% in March with its 26% and 17% allocations to Japan and South Korea bearing the brunt of the market turmoil sparked by the US-led war on Iran and the subsequent surge in oil prices.
While the bargain-hunting value investor said its portfolio of investment and holding companies behaved in line with expectations and experience of such conditions, the weighted average discount of its investments widened to 42% from 38%, hurting short-term performance.
Samsung C&T was the worst performer as shares in the Korean company fell 28%. Having taken some profit in February, fund manager Joe Bauernfreund added to the position in March taking advantage of their very wide 59% discount. The shares have rallied in April and are up 25% this year.
All this leaves AGT’s portfolio up 5.7% over one year and with a total NAV return of 39.3% over five years that trails the 64.6% return of the MSCI World index. Shares in the £1bn investment trust stand on an 8.6% discount.
Vivendi, a 5% position at the end of the month, was a “significant detractor” again, with shares in the French media conglomerate having halved since last July. The stock derated after a court ruling in favour of Vincent Bollore, the billionaire businessman who holds nearly 30% of the company, which AGT said reduced the chance of him having to buy out minority investors.
The shares have also been hit by the falling share price of Universal Music Group (UMG), which accounts for nearly three quarters of its listed portfolio, making AGT interested in the £48bn bid launched by Pershing Square Capital Management last week.
Bauernfreund said while the market was sceptical about the largely share-based bid from Pershing Square’s Bill Ackman, with UMG trading around €20 compared to Pershing Square’s €25 per share valuation, the move highlighted UMG’s “deep undervaluation and the significant self-help measures the company has at its disposal to unlock and create shareholder value”.
He said the investment in Vivendi had not been a mistake. “Exactly what happens next is hard to predict, but Vivendi at close to a 50% discount and UMG deeply undervalued, the ingredients for attractive long-term returns are in place,” Bauernfreund said.
News Corp, AGT’s top holding at 7% of assets was the portfolio’s only riser, after Dow Jones, the business news and data provider that makes up 45% of its assets, set out plans to grow profits from $558m to over $1bn in the next five years, which was 14% above analysts’ consensus forecasts. “We came away highly impressed,” said Bauernfreund.
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