The largest positive contributors to second quarter returns included Newmont Corp. (0.9%, +18%), Telephone & Data Systems (TDS, Financial) (0.5%, +30%) and Costco Wholesale (COST, Financial) (0.6%, +16%). Newmont Corp., the world's largest gold miner, reflected a rally in the metal as geopolitical uncertainty rose and China, India, and Russia aggressively added to reserves in part to hedge a falling dollar. Telephone & Data Systems rose after 83%-owned UScellular (0.1%, +53%) finally announced the sale of its wireless customers and a portion of its spectrum to T-Mobile (TMUS, Financial) for $4.4 billion; USM's remaining assets, including its tower portfolio, partnership stakes, and additional spectrum are likely worth at least as much as its cellular business and could also be monetized in the near term. Costco has defied recent retail industry softness with its cohort of relatively affluent, intensely loyal members.
Key detractors from quarterly performance included spirits producers Brown-Forman (BF.A, Financial) (BF.B, Financial) (A 1.0%, -16%; B 0.1%, -16%) and Diageo (DEO, Financial) (0.9%, -15%), as wholesalers continue to work through excess inventories and more tepid consumer demand following the COVID “super cycle” for spirits. Furthermore, the prospect of tariffs being reintroduced (and retaliation from other countries) could lead to lower demand and/or margins. Finally, depressed crop prices have led to concerns that farmers will defer purchases of equipment from manufacturers such as Deere & Co. (DE, Financial) (1.5%, -9%) and CNH Industrial (CNH, Financial) (0.6%, -19%)
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.
LET'S TALK STOCKS
Jefferies Financial Group (JEF, Financial) (0.1% of net assets as of June 30, 2024) (JEF – $49.97 – NYSE is a leading New York-based investment banking and capital markets firm. The company recently completed its multi-year Strategic Simplification Plan by announcing the sales of its remaining significant legacy merchant banking businesses. Jefferies has utilized proceeds from many of these sales to repurchase shares; its share count has declined by about 37% over the last ten years. Recently, its core businesses are benefiting from a rebound in activity; fiscal second quarter investment banking and capital markets revenues increased by 59% and 24%, respectively, compared to last year.
Newmont Corp. (NEM, Financial) (0.9%) (NEM – $41.65 – NYSE) is a leading global gold and copper mining company with a diverse portfolio of assets located in North America, South America, Australia, and Africa. Newmont is the world's largest gold producer, boasting an impressive reserve base and strong project pipeline that underpins its long-term production outlook. Their self-stated transformational acquisition of Newcrest has thus far proved successful, with the company identifying $150 million of potential annual synergies—twice what was initially expected. In 2023, Newmont produced nearly 6 million ounces of gold and continued to advance key projects such as the Yanacocha Sulfides in Peru and expansion in Australia. The company is committed to paying its $1 per share dividend, which produces a yield of 2.1%, reducing net debt, and opportunistically buying back stock. We believe that Newmont trades at an attractive discount to peers, with an estimated 2024 PMV of $52 per share.
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 June 30, 2024.
