INVESTMENT SCORECARD
As the economic picture improved, industrials performed well in the fourth quarter. These included aerospace supplier Crane Corp. (1.4% of net assets as of December 31, 2023, +33%), diversified manufacturers AMETEK (3.0%, +12%) and ITT, Inc. (1.2%, +22%), waste collection firm Republic Services (1.9%, +16%), and water management companies Xylem (0.8%, +26%) and Watts Water (0.7%, +21%). Consumer facing companies such as American Express (1.4%, +26%) and Costco (0.8%, +20%) benefited similarly. Although the Fund has relatively little energy exposure, lower oil prices impacted holdings in Chevron (0.6%, -11%), Exxon Mobil (0.4%, -14%) and Halliburton (0.3%, -10%). Finally, gold royalty company Franco-Nevada (0.5%, -17%), historically a solid performer, was hit by threats that Panama would seize a large mine in which has an interest.
The Asset Fund is subject to the risk that the portfolio securities' PMV may never be realized by the market, or that the portfolio securities' prices decline.
Garrett Motion Inc. (GTX, Financial) (0.1% of net assets as of December 31, 2023) (GTX - $9.67 - NASDAQ), headquartered in Rolle, Switzerland, manufactures and sells highly engineered turbocharger and electric boosting technologies for light and commercial vehicle original equipment manufacturers as well as the global vehicle independent aftermarket. We see the need for turbochargers for internal combustion engines (ICE) to last well into the next decade while Garrett enters adjacent markets, such as marine and industrial, where turbo usage will be needed to help improve efficiencies and reduce emissions. We view the expected sale of shares by Oaktree and Centerbridge as a catalyst as an overhang on shares is removed over the next two years.
IVECO Group (MIL:IVG, Financial) (0.2%) (IVG-MI β β¬9.95 β Euronext Milan) β headquartered in Turin, Italy β is a leading manufacturer of commercial vehicles and powertrain systems with operations in 36 countries. Formed through a demerger from CHN Industrial in January 2022, IVG produces light through heavy-duty trucks, buses, firefighting, civil defense, and off-highway vehicles, as well as engines, transmissions, and axles. As one of the five key commercial truck OEMs serving the European market, the company recently completed its first-ever full product lineup refresh, which includes electric offerings for all vehicle types. As the industry moves towards more stringent safety and emissions regulations in 2027 and beyond, we believe IVECO is well positioned to capitalize on its continued product development initiatives. We note that the company will be hosting a Capital Markets Day in March 2024 where management will be outlining revised long-term revenue and profitability targets, as well as providing enhanced visibility into the commercial vehicle business, with particular focus on trucks and defense.
Tegna Inc. (TGNA, Financial) (less than 0.1%) (TGNA - $15.30 - NYSE) located in Tysons, Virginia, owns and operates 64 television stations in 51 U.S. markets. The company is the largest owner of Big Four affiliates in top 25 markets, and reaches approximately 39% of all television households nationwide. In February 2022, Standard General announced plans to buy TEGNA for $24 per share in cash + a ticking fee; however, the deal faced regulatory obstacles and financing ultimately expired, which led to termination of the deal. TEGNA has a strong station portfolio and industry-leading balance sheet, but the current FCC ownership rules/ tighter regulatory environment also leaves the company with limited room for further TV station M&A from where we sit today. However, even in the absence of large-scale M&A, TGNA is well-positioned to generate significant FCF this year, supported by a robust 2024 presidential election advertising cycle & other cyclical events (i.e., the Olympics on NBC), which we expect to be primarily deployed into capital returns.
When discussing specific stocks in the portfolios of the Funds, favorable earnings prospects do not necessarily translate into higher stock prices, but they do express a positive trend that we believe will develop over time. Individual securities mentioned are not necessarily representative of a Fund's entire portfolio. For the holdings discussed, the percentage of the Fund's net assets and their share prices stated in U.S. dollar equivalent terms are presented as of December 31, 2023.
