MLN – March 2021 Quarterly Newsletter

1
SIGNIFICANT RETURNS IMPACTING
THE PORTFOLIO DURING THE
QUARTER IN LOCAL CURRENCY
Economic recovery and markets in full flight — what’s next?
Global share markets have started 2021 with the same economic
optimism we witnessed following the Pfizer vaccine announcement in
November. Economic activity has surged in the US, driven by a rapid
vaccine roll-out that has already reached a third of the population. Travel
bookings have spiked, restaurants are serving more meals, and offices
may reopen in September. The CEOs of Hilton and TripAdvisor predict
much stronger travel volumes than initially expected. Vaccine optimism
drove global markets 4.5% higher in the first quarter (according to the
MSCI World Index), while the US S&P 500 Index is up 6.5%.
Strong portfolio performance despite lagging technology
stocks
The Marlin Portfolio enjoyed a strong quarter despite the headwinds
facing many growth companies. It delivered a 10.2% gross performance
return, beating our global benchmark, which gained 8.6%. The Adjusted
NAV return for the quarter was +9.6%.
So far, 2021 contrasts starkly with last year, when the technology sector
drove markets higher despite weak cyclical stocks. The first-quarter has
instead been characterised by underperforming technology, healthcare,
and consumer companies (which we tend to favour), and outperforming
energy companies, banks, and industrials. Investors are essentially betting
an economic recovery will benefit the sectors that struggled in 2020, at
the expense of stay-at-home winners like Amazon and PayPal.
SIGNATURE
BANK
+68
%
GREGGS PLC
+25
%
ALPHABET INC
+18
%
ADIDAS
-11
%
STONECO
-27
%
Three companies contributed significantly to portfolio
performance
Signature Bank (+68% in the quarter) continues to perform well, even
compared to the broader US banking index, which was up +23% in
the quarter. Underpinning this rise was an increase in the US 10-year
government bond yield, which ended the quarter at 1.74%, up from
0.91% at the start of the year. Signature Bank is also benefiting from an
influx of cheap deposits. This has come on the back of recent team hires
in areas including fund banking (services to private equity firms), mortgage
servicing, and cash management for cryptocurrency exchanges.
During the quarter, we reduced our Signature Bank position slightly after
rapid share price growth took the holding up to a 12% weight in the
portfolio. But the company remains one of our largest positions — we
are still confident it can grow earnings at 10 to 20%. It was also pleasing
to see our other bank investment, First Republic (+13%), contribute
positively to performance.
Alphabet (+18%) was the second largest contributor to the quarter’s
performance, driven by a strong digital advertising market and reports that
advertisers are starting to return to pre-COVID advertising patterns.
Greggs (+25%), an ‘on-the-go’ UK food retailer that we added to our
portfolio in December, was the third biggest contributor to performance.
Our recent meeting with CEO Roger Whiteside made us much more
positive about the ongoing effect of COVID and Gregg’s long-term
strategy.
Same-store sales are recovering quickly as the UK economy reopens.
The company has resumed opening 100 new stores a year and lifted its
long-term target from 2,500 to 3,000 stores (they currently have 2,100),
which still appears conservative. We are encouraged by the company’s
progress in digital channels (delivery, and click and collect), a revamped
loyalty program, and other initiatives to increase sales.
Look ahead — avoid COVID ‘tunnel vision’
The last year in markets has been defined by COVID. But it is easy to
focus too much on COVID and get ‘tunnel vision’. What COVID-driven
behaviours will become permanent? How quickly will the vaccine roll-out
progress? When will international travel resume? The questions are
endless. While it is important to reflect on the lessons from the last year,
investors also need to think ahead. You don’t want to invest while looking
in the rear-view mirror.
COVID tunnel vision has created several risks. At first there was a
stampede to invest in companies that benefitted from lockdowns.
These so-called ‘COVID-beneficiaries’ like Zoom (video calling), Shopify
(ecommerce) and Teladoc (remote medicine) attracted very high investor
¹
Share price premium to NAV (using NAV to four decimal places)
as at 31 March 2021
1 January 2021 – 31 March 2021
MLN NAVPREMIUM
1
$
1. 1 89.9
%$
1.3 0
Share Price
QUARTERLY NEWSLETTER
High quality growth companies have struggled so far in 2021. While the
underperforming technology sector weighed on our portfolio, strong
performances from a handful of companies — including Signature Bank
— helped us outperform the market in the first quarter.
0% 5% 10% 15% 20% 25% 30% 35%
Energy
Financials
Industrials
Real Estate
Materials
Comm Services
S&P 500 Index
Health Care
Consumer Disc
Utilites
Info Tech
Consumer Staples
31%
16%
11%
9%
9%
8%
7%
3%
3%
3%
2%
1%
Cyclical outperformance a stark contrast to 2020
(S&P 500 sector performance in Q1 2021)

year — triple the market rate — while trading on a valuation multiple in line
with the broader US share market. Investors are overlooking value in plain
sight as they rush for the latest high-growth stocks.
Similarly, quality businesses that may not benefit as much in an economic
upturn, but should still grow strongly through the cycle, are currently
being ignored. Examples of these in our portfolio are our discount store
investments (Dollar General and Dollar Tree), medical device company
Boston Scientific, and UK food retailer Greggs.
PERFORMANCE
as at 31 March 2021
Disclaimer: The information in this newsletter has been prepared as at the date noted on the front page. The
information has been prepared as a general summary of the matters covered only, and it is by necessity brief.
The information and opinions are based upon sources which are believed to be reliable, but Marlin Global Limited
and its officers and directors make no representation as to its accuracy or completeness. The newsletter is not
intended to constitute professional or investment advice and should not be relied upon in making any investment
decisions. Professional financial advice from an financial adviser should be taken before making an investment.
To the extent that the newsletter contains data relating to the historical performance of Marlin Global Limited or
its portfolio companies, please note that fund performance can and will vary and that future results may have no
correlation with results historically achieved.
Marlin Global Limited
Private Bag 93502, Takapuna, Auckland 0740, New Zealand
Phone: +64 9 484 0365 | Fax: +64 9 489 7139
Email: enquire@marlin.co.nz | www.marlin.co.nz
Headquarters Company
%
Holding
China
Alibaba Group6.3%
Tencent Holdings4.1%
France
EssilorLuxottica3.0%
Germany
Adidas3.6%
Ireland
Icon4.5%
United Kingdom
Greggs Plc3.4%
United States
Alphabet7.0%
Amazon.Com3.2%
Boston Scientific Co3.1%

Dollar General5.0%
Dollar Tree4.8%

Edwards Lifesciences Corp.3.6%
Facebook10.8%
First Republic Bank San
Francisco
3.4%
Floor & Décor Holdings3.9%
Gartner Inc4.7%
HEICO Corporation1.5%
Hexcel Corporation2.9%
Hilton Worldwide Holdings1.5%
Mastercard5.1%
PayPal Holdings4.4%
Signature Bank6.6%
StoneCo1.4%
TJX Companies Inc1.5%
Equity Total99.3%
New Zealand dollar cash1.7%
Total foreign cash0.2%
Cash Total1.9%
Forward Foreign Exchange(1.2%)

TOTAL100.0%
PORTFOLIO HOLDINGS
SUMMARY
as at 31 March 2021
COMPANY NEWS
interest and pushed valuations to stratospheric levels. We have also
seen this behaviour in other high-growth companies like electric vehicle
manufacturers, software, and biotech stocks. Many prices are now
extreme.
More recently, investors have focused on companies that will benefit from
economies reopening. Companies like Expedia, Southwest Airlines, and
AMC (a cinema chain) are all trading above pre-pandemic levels though
they are not fully out of the woods.
Are investors focussing too much on such stocks and overlooking other
parts of the market? We think so.
Investors bidding up many high-growth tech stocks have neglected big
‘boring’ technology companies like our portfolio companies Facebook,
Alibaba and Amazon. These companies have underperformed the market
over the last six months. Facebook, for example, is benefitting from the
ongoing move to online advertising. Its revenue is growing at over 20% a
Ashley Gardyne
Senior Portfolio Manager
Fisher Funds Management Ltd
15 April 2021
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Dividend Paid 26 March 2021
A dividend of 2.21 cents per share was paid to Marlin
shareholders on 26 March 2021, under the quarterly distribution
policy. Interest in Marlin’s dividend reinvestment plan (DRP)
remains high with 40% of shareholders participating in the plan.
Shares issued to DRP participants are at a 3% discount to
market price. If you would like to participate in the DRP, please
contact our share registrar, Computershare on 09 488 8777.
3 Months
3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return+1.8%+29.4%+21.8%
Adjusted NAV Return +9.6%+18.8%+17.6%
Portfolio Performance
Gross Performance Return+10.2%+23.2%+21.9%
Benchmark Index¹+8.6%+11.7%+13.0%
1
Benchmark index: World Small Cap Gross Index until 30 September 2015 & S&P Large Mid Cap/S&P Small
Cap Index (hedged 50% to NZD) from 1 October 2015
Non-GAAP Financial Information
Marlin uses non-GAAP measures, including adjusted net asset value, adjusted NAV return, gross performance
return and total shareholder return. The rationale for using such non-GAAP measures is as follows:
»adjusted net asset value – the underlying value of the investment portfolio adjusted for capital
allocation decisions after expenses, fees and tax,
»adjusted NAV return – the net return to an investor after expenses, fees and tax,
»gross performance return – the Manager’s portfolio performance in terms of stock selection and
currency hedging before expenses, fees and tax, and
»total shareholder return – the return combines the share price performance, the warrant price
performance, the net value of converting any warrants into shares, and the dividends paid to
shareholders. It assumes all dividends are reinvested in the company’s dividend reinvestment plan,
and that shareholders exercise their warrants, (if they were in the money), at warrant expiry date.
All references to adjusted net asset value, adjusted NAV return, gross performance return and total shareholder
return in this newsletter are to such non-GAAP measures. The calculations applied to non-GAAP measures are
described in the Marlin Non-GAAP Financial Information Policy. A copy of the policy is available at http://marlin.
co.nz/about-marlin/marlin-policies/