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Written by the Mackenzie Betterworld Team
Portfolio and Sectors review
The Mackenzie Betterworld Global Equity Fund posted positive returns for a third consecutive month continuing its upward trajectory since the start of the year. Notably, stock selection within healthcare and communication services contributed most to portfolio performance. The team’s holding in Disney (+9% in local currency on the month) saw Bob Iger’s initiatives to return to growth being recognized by investors, putting the company in a favourable position to win the proxy contest with Trian/Nelson Peltz. Alphabet (+9% in local currency on the month), also contributed positively. The company remains an AI beneficiary as they continue to develop a credible alternative to the Microsoft AI franchise. A smaller holding of the fund, Bloom Energy, was a notable performer (+28% in local currency on the month). Bloom Energy produces large-scale power generation platforms that provide highly reliable baseload electricity to businesses, essential services, and critical infrastructure. The company specializes in solid oxide fuel cells – which in simple terms transform chemical energy from a resource such as hydrogen, into electricity without combustion. This type of technology is far more energy efficient, thereby reducing consumption requirements as well as greenhouse gas emissions.
The Fund’s holdings in Information Technology, such as Palo Alto Networks (-9% in local currency on the month) and Adobe (-10% in local currency on the month) detracted from performance during the month. Palo Alto is seeing its sales cycle become more extended. The team believes that growing cyber risk makes this a temporary dip before corporate demand increases again for cyber security. With respect to Adobe, the company declined on Q1 earnings being below expectations. On the positive side, this years Adobe Summit demonstrated numerous GenAI platforms the company is working on. The Betterworld team believes this will support increasing earnings growth for the company in the future.
Within the Mackenzie Betterworld Canadian Equity Fund, exposure to the materials sectors contributed most to the fund’s performance. Portfolio holdings Agnico Eagle and Capstone were up +24% and 21% respectively for the month. The recent rise in the price of gold and copper have been tailwinds for both companies.
The Fund’s exclusion of fossil fuels, and therefore lack of investment in the energy sector, detracted most from performance as oil prices rose throughout the month.
Company Engagement
The Walt Disney Company is a diversified media conglomerate operating media networks, theme parks and resorts, film and TV studios, and direct-to-consumer (DTC) streaming services. It is the global leader in theme parks, with hotels and cruise lines being family-oriented. The company also distributes branded merchandise through retail, online, and wholesale businesses. Its DTC segment provides various entertainment and sports content to consumers around the world. Disney is a leading entertainment company with best-in-class intellectual property that supports long term content monetization opportunities.
With aggregate sports representing 19% of revenues, the Betterworld team met with Walt Disney to discuss the recently announced ESPN sports licensing deal with betting brand Penn Entertainment. The team felt the idea of having gambling under the same roof as Disney to be a concerning initiative. After discussing with Disney, they were able to clarify that the company would only be assisting in the marketing of Penn’s apps and in exchange, would receive $1.5 billion cash and $500 million of equity warrants during a 10-year deal. This is a licensing model that gets recognized as advertising revenue and ESPN sports programming will not be directly integrated into the betting app. Disney emphasized that they do not want to become part of the sports betting book.
The Betterworld team intends to regularly monitor company reports and schedule a follow up meeting to discuss the progress of the agreement.
Proxy Voting
In March, the Betterworld team participated via proxy in 3 company meetings with Starbucks, Orsted and Novo Nordisk.
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