Janus Henderson Overseas Fund Reports Mixed Performance in Q2 2024

Janus Henderson Overseas ADR Managed Account Q2 2024 Commentary

We remain on the lookout for pockets of opportunity where we believe the market has underestimated the potential for free- cash-flow growth. Overseas ADR Managed Account Performance - USD (%) (as of 06/30/24) Global equities rose on signs of moderating inflation and stabilizing economic growth. Unexpected election results in France, Mexico, and India rattled investors, however. The second-quarter rally was relatively narrow, led by information technology stocks viewed as potential beneficiaries of artificial intelligence. The European Central Bank cut rates by 25 basis points in June. The Federal Reserve and Bank of England left rates unchanged. Taiwan Semiconductor Manufacturing Company (TSM) was a top contributor to relative performance. The world's largest contract chip manufacturer, TSMC is a major fabricator of graphics processing units that are integral to the deployment of generative AI. TSMC delivered strong revenue growth, reflecting both increased sales volumes and a business shift toward higher margin components. We believe the company is well positioned to benefit from growing investments in AI because of its competitive advantages in next-generation manufacturing and its business relationships with leading technology companies. HDFC Bank (HDB) was another notable contributor. A leading bank in India, HDFC has benefited from a strong balance sheet and robust deposit base that has provided a cost-effective source of funds. The past year has been a period of transition and uneven financial performance for the bank, as it worked to integrate a merger with its former mortgage subsidiary. As HDFC has made progress on this integration, investors have become more bullish on the potential synergies offered by the merger. HDFC's improved deposit growth has helped alleviate concerns over slower loan growth while also supporting lending margins. As a result, the stock rallied in the quarter. Given its strong market position in an underpenetrated Indian financial services market, we continue to see long-term opportunity for HDFC. Porsche (OTCPK:POAHY) was a relative detractor. The stock declined after the automaker reported disappointing revenue and earnings growth, partly due to weak sales trends in China. Porsche has been undergoing a transition as it prepares to roll out new models of many of its vehicles. This transition led to reduced availability and lost sales, while launch costs pressured margins. We see these as short-term issues, and the company has indicated that sales volumes and margins should improve in 2025 once the new models reach the market and price increases are realized. We held onto the stock. Shares of Samsonite International (OTCPK:SMSOF), another detractor, declined after the global luggage company reported lower- than-expected revenues and reduced guidance. While these results primarily reflected weaker trends for its North American business, luggage sales in India also slowed from their rapid pace in the previous quarter. On a positive note, revenue growth remained resilient in other Asian markets, and margins improved across geographic regions. Despite some near-term business uncertainty, we remain positive about Samsonite's efforts to drive profitability through cost-cutting and an increased focus on higher-margin premium brands. We have welcomed signs of stabilizing economic growth in many countries, even as we acknowledge signs of softening in some market sectors and regions. Inflation has moderated but not as quickly as policymakers would like. As a result, we expect central banks to take a gradual approach to rate cuts. We also see the potential for higher interest rates in Japan, where the Bank of Japan is under increased pressure to hike rates to combat rising inflation. The expectation for higher- for-longer interest rates could have implications for global economic growth and market performance. We recognize that geopolitical uncertainty and weak economic growth in China could add to market risks. On a positive note, we have been encouraged to see investors pay increased attention to individual company fundamentals in contrast to last year when macroeconomic concerns often drove market performance. We believe this return to fundamentals has created a favorable backdrop for our active, bottom-up stock selection. We continue to find compelling investment opportunities across sectors and geographies, as we seek companies with strong balance sheets, proven management teams, and durable competitive advantages. Above all, we remain on the lookout for superior free-cash-flow growth that we believe is undervalued by the market. We view this disciplined, fundamentals-driven approach will be key to delivering long-term capital appreciation for our investors. Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Janus Henderson Overseas Fund Q2 2024 Commentary

The European Central Bank cut rates by 25 basis points in June. The Federal Reserve and Bank of England left rates unchanged. Taiwan Semiconductor Manufacturing Company (TSMC) (TSM) was a top contributor to relative performance. The world's largest contract chip manufacturer, TSMC is a major fabricator of graphic processing units that are integral to the deployment of generative AI. TSMC delivered strong revenue growth, reflecting both increased sales volumes and a business shift toward higher margin components. We believe the company is well positioned to benefit from growing investments in AI because of its competitive advantages in next-generation manufacturing and its business relationships with leading technology companies. HDFC Bank (HDB) was another notable contributor. A leading bank in India, HDFC has benefited from a strong balance sheet and robust deposit base that has provided a cost-effective source of funds. The past year has been a period of transition and uneven financial performance for the bank, as it worked to integrate a merger with its former mortgage subsidiary. As HDFC has made progress on this integration, investors have become more bullish on the potential synergies offered by the merger. HDFC's improved deposit growth has helped alleviate concerns over slower loan growth while also supporting lending margins. As a result, the stock rallied in the quarter. Given its strong market position in an underpenetrated Indian financial services market, we continue to see long-term opportunity for HDFC. Porsche (OTCPK:POAHY)(OTCPK:POAHF) was a relative detractor. The stock declined after the automaker reported disappointing revenue and earnings growth, partly due to weak sales trends in China. Porsche has been undergoing a transition as it prepares to roll out new models of many of its vehicles. This transition led to reduced availability and lost sales, while launch costs pressured margins. We see these as short-term issues, and the company has indicated that sales volumes and margins should improve in 2025 once the new models reach the market and price increases are realized. We held on to the stock. Shares of Samsonite International (OTCPK:SMSOF), another detractor, declined after the global luggage company reported lower-than-expected revenues and reduced guidance. While these results primarily reflected weaker trends for its North American business, luggage sales in India also slowed from their rapid pace in the previous quarter. On a positive note, revenue growth remained resilient in other Asian markets, and margins improved across geographic regions. Despite some near-term business uncertainty, we remain positive about Samsonite's efforts to drive profitability through cost-cutting and an increased focus on higher-margin premium brands. We have welcomed signs of stabilizing economic growth in many countries, even as we acknowledge signs of softening in some market sectors and regions. Inflation has moderated but not as quickly as policymakers would like. As a result, we expect central banks to take a gradual approach to rate cuts. We also see the potential for higher interest rates in Japan, where the Bank of Japan is under increased pressure to hike rates to combat rising inflation. The expectation for higher- for-longer interest rates could have implications for global economic growth and market performance. We recognize that geopolitical uncertainty and weak economic growth in China could add to market risks. On a positive note, we have been encouraged to see investors pay increased attention to individual company fundamentals in contrast to last year when macroeconomic concerns often drove market performance. We believe this return to fundamentals has created a favorable backdrop for our active, bottom-up stock selection. We continue to find compelling investment opportunities across sectors and geographies, as we seek companies with strong balance sheets, proven management teams, and durable competitive advantages. Above all, we remain on the lookout for superior free cash flow growth that we believe is undervalued by the market. We view this disciplined, fundamentals-driven approach will be key to delivering long-term capital appreciation for our investors.