MLN - September 2024 Quarterly Newsletter

1
Stock market rally continues but lots going on under
the hood
Marlin ended the quarter with gross performance down (1.4%) and
the adjusted NAV was down (2.0%), compared with our global
benchmark which was up +5.5%.
In July and August, softening US labour data and sharply falling
inflation spurred expectations of imminent rate cuts by the US Federal
Reserve. This drove a sharp change in market leadership – small
companies and value stocks started outperforming growth stocks as
investors piled into companies that were more in need of interest rate
relief. That resulted in growth stocks underperforming value stocks by
7% for the quarter.
In September, the Chinese Government delivered a multi-pronged
stimulus package (monetary, fiscal, macro-prudential), at a time
when sentiment was at a very low ebb, and the China market had its
strongest rally in years.
Against this fast-moving backdrop, the portfolio had four stock
specific issues rear their head in a short space of time (the July month
was tough). While we expect our investment theses to change from
time to time, it is rare to have four things happen at once (discussed
below).
Portfolio update
Floor and Décor (+30% for the quarter in local currency) was buoyed
by falling mortgage rates, fuelling expectations that the key lead
indicator of flooring demand, existing home sales, will rebound from
near 50-year lows. Key competitor LL Flooring filed for bankruptcy in
August, serving as a reminder of how well Floor & Décor is doing vs
competitors in a tough macro environment.
Mastercard (+13%) faced pressure earlier in the quarter due to a
combination of a potentially weakening U.S. consumer and lingering
concerns after the US District Court dismissed a settlement offering
by US Banks/Mastercard/Visa to a group of retailers. Regulation is
something Mastercard has dealt with for years and the company has
continued to gain market share in every major market around the
world, despite most of those markets having heavier regulation than
the US.
Tencent (+19%) reported a solid result earlier in the quarter and
again demonstrated its ability to outgrow peers against a tough China
macro backdrop. More recently, the share price was strong, in line
with the Chinese stock market, which was buoyed by a multipronged
stimulus package from the Government.
Edwards Lifesciences (-27%) fell sharply during the quarter,
as expected growth in its core TAVR medical device fell below
expectations. The company revised its full-year guidance from 8-10%
to 5-7% growth, citing capacity constraints in the operating rooms
used to perform the TAVR procedures. While we think there is still
a long growth runway ahead for Edwards, we have reduced our
position as we await more clarity on the pace of the turnaround.
Dexcom (-40%) fell sharply during the quarter as it unexpectedly
lowered its growth expectations for the year. Unlike Edwards, these
headwinds were somewhat self-inflicted. This is a company that
has executed well, growing sales of its continuous glucose monitors
(CGMs) nearly 30% p.a. over the last five years to around $4 billion
globally. Amidst a major salesforce restructure, the launch of new
consumer-facing CGM, and the ramp up of two manufacturing
facilities, the company has run into some execution challenges. While
we think there is still a long growth runway ahead for Dexcom, We
have scaled back our position while we wait for greater clarity on the
speed of the turnaround.
Portfolio activity
We added Hermès and Nvidia to the portfolio during the quarter.
Hermès is a French luxury design brand that sells leather goods,
clothes, silk scarves, homeware and jewellery. The company is known
for its iconic Birkin and Kelly bags where resale values often exceed
retail. Ultra-high-quality products, exclusivity (key leather products
are hard to acquire and have waiting lists) and a vertically integrated
supply chain (quality control) give Hermès a strong brand moat. And
it is run by a very long-term oriented management team. The luxury
sector has been under pressure as Hermes’ competitors “over-
earned” coming out of Covid-19 by raising prices too aggressively.
Hermes got caught up in that poor sentiment (despite the fact the
company did not raise prices aggressively) and that gave us an
opportunity to add it to the portfolio.
Nvidia is a semiconductor chip designer specialising in GPUs
(graphics processing units), of which it is the world’s largest supplier
(circa 85% market share). Its GPUs are used in data centres
(circa 90% of its earnings), robotics, gaming, and autonomous
driving. Nvidia’s ten-year head start developing its ecosystem of
chip hardware, software and networking creates a lock-in effect
for customers and underpins the moat. Demand for accelerated
compute will remain structurally high for some time. The company’s
co-founder continues to run the company along with a highly talented
management team.
While we still have concerns about there being too much AI hype
in the market, coupled with the higher-than-normal uncertainty that
comes with a brand-new revenue stream (GPUs being swapped for
legacy chips/CPUs in the datacentre), the recent PE valuation de-
rating vs the S&P500 by circa 25% gave us an opportunity to initiate
a small position.
We exited Dollar Tree and Dollar General during the
quarter.
During the GFC, the dollar stores saw sales growth accelerate as
consumers “traded down”. This defensive characteristic has not
been repeated in the current environment. The low-income consumer
¹
Share price discount to NAV (including warrant price on a pro-rated basis and using the net asset value per share, after expenses, fees and tax, to four decimal places).
as at 30 September 2024
1 July 2024 – 30 September 2024
MLN NAVDISCOUNT
1
$
0.996.3
%$
0.92
Share Price
QUARTERLY NEWSLETTER
$
0.02
Warrant Price

PERFORMANCE
as at 30 September 2024
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 a 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
Email: enquire@marlin.co.nz | www.marlin.co.nz
Headquarters Company
%
Holding
China
Tencent Holdings4.1%
France
Hermes International2.2%
Ireland
Icon4.8%
United Kingdom
Greggs Plc4.0%
United States
Alphabet6.0%
Amazon.Com8.3%
ASML Holding NV5.6%
Boston Scientific4.3%

Danaher Corporation5.0%
Dexcom Inc3.7%

Edwards Lifesciences Corp.4.0%
Floor & Décor Holdings5.2%
Gartner Inc4.2%
Intuitive Surgical Inc3.6%
Mastercard6.2%
Meta Platforms Inc4.1%
Microsoft7.1%
MSCI Inc4.1%
Netflix3.0%
Nvidia Corp1.0%
salesforce.com3.7%
UnitedHealth Group Inc3.9%
Equity Total98.1%
New Zealand dollar cash0.1%
Total foreign cash0.3%
Cash Total0.4%
Forward Foreign Exchange1.5%

TOTAL100.0%
PORTFOLIO HOLDINGS
SUMMARY
as at 30 September 2024
COMPANY NEWS
If you would like to receive future
newsletters electronically please email us
at enquire@marlin.co.nz
Dividend Paid 27 September 2024
A dividend of 2.07 cents per share was paid to Marlin
shareholders on 27 September 2024, under the quarterly
distribution policy. Interest in Marlin’s dividend reinvestment plan
(DRP) remains high with 39% 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(2.3%)(8.8%)+9.2%
Adjusted NAV Return (2.0%)+0.4%+8.7%
Portfolio Performance
Gross Performance Return(1.4%)+2.5%+11.7%
Benchmark Index¹+5.5%+7.1%+10.3%
1
Benchmark index : S&P Large Mid Cap/S&P Small Cap Index (hedged 50% to NZD)
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 percentage change in the adjusted NAV value,
»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
marlin.co.nz/about-marlin/marlin-policies.
SIGNIFICANT RETURNS IMPACTING
THE PORTFOLIO DURING THE
QUARTER IN LOCAL CURRENCY
FLOOR & DÉCOR
+30
%
EDWARD
LIFESCIENCES
-27
%
DOLLAR
TREE
-34
%
DOLLAR
GENERAL
-36
%
DEXCOM
-40
%
Sam Dickie
Senior Portfolio Manager
Fisher Funds Management Ltd
11 October 2024
(which makes up the majority of the customer base) continues to
reduce spending in the face of the higher cost of living. While higher-
income consumers are also tightening the belt, the companies are
facing increased competition from large discount stores like Walmart
and ecommerce retailers trying to win these customers back. This is
a change in thesis and hence we exited the small positions.
Reporting on the effects of climate change on Marlin
Marlin will soon be publishing climate-related disclosures, helping
investors understand the current and future potential impact
of climate change on their investment. The first Marlin Climate
Statement for the 30 June 2024 financial year will be published on the
Marlin website (marlin.co.nz) around the end of October.