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Fisher Funds' investment in US cosmetics pays off

The global investment market might be going sideways, but Shisedo‘s bid for American cosmetic company Bare Escentuals showed there were still gains to be made at the company level, according to Fisher Funds managing director Carmel Fisher.

Late last week, Japanese cosmetic giant Shiseido launched its acquisition offer for Bare Escentuals which represented a 40% premium to the share price.

The takeover bid should pay off for the three New Zealand funds managed by Fisher Funds which all hold shares in the company.

The net asset value of listed company Marlin Global should rise by $1.7 million under the offer, with further gains for the Fisher Funds International Growth Fund and the Fisher Funds KiwiSaver Growth Scheme.

About 4% of the Marlin Fund was invested in Bare Escentuals and fund manager Ken Applegate said the fund would accept the takeover offer as the takeover price of US$18.20 per share was “an opportunity that was too good to ignore for our investors”.

“I have known Bare Escentuals for a number of years, and introduced it to our funds in August last year because the company had been overlooked by the market and its share price had drifted to absurdly low levels. This takeover offer represents close to a 100% gain over our average purchase price.”

Fisher Funds managing director Carmel Fisher told Bare Escentuals had been undervalued at the time of purchase and the successful investment was a result of buying leaders in niche segments rather than relying on broad share markets to perform.

“This was particularly good news at this time of year when there is not a lot going on. It shows that while the overall market may be moving sideways, there is still a lot happening and plenty of good opportunities at the individual company level.”

Shisedo’s US$1.7 billion acquisition is being made through an all-cash, agreed tender offer and is designed to help expand Shiseido's portfolio into minerals-based cosmetics and strengthen its customer base in the US.

More by Robert Smith

Comments and questions
5

This article isn't news reporting, it is blatant public relations hype. Who cares if Fisher Funds got ONE of its bets right? How do we know it wasn't simply good luck rather than good stock selection? Are Fisher & Applegate prepared to talk about the big bets they got really wrong? I suppose there aren't any...

It seems that 'Investment Adviser' has a big chip on his shoulder. Or is it a case of sour grapes? Get over it man, this was a good win, plain and simple.

Yes, get over it. And read "The Zurich Axioms", one of which is "put all yours eggs in one basket and watch the basket closely". I'm a Fisher Growth Fund Kiwisaver and very pleased to be. Keep at it Fishers!

I liked the look of FF but after seeing the fee structure and performance fee payable I decided against investing with FF. They are successful at what they do targeting small companies. The returns are very positive but after their fees & tax its not all what its cracked up to be.

The Kingfish management fee is 1.25% P.A. but reduces by 0.1% for every 1% by which the gross return is less than the NZX 90-Day Bank Bill Index change. I am a little uncertain about that small word “change” and will consider clarifying the point. The minimum fee payable is 0.75%.

There is also a performance fee of 15% of the excess return (NZX 90-Day Bank Bill Index change plus 7%) with a high water mark value that must be exceeded. Its all a bit complex and difficult to explain, but in my view, if Kingfish performs well, then the fees make the investment worthwhile. I like the fact that a poor return hits the manager, Fisher Funds quite hard.

I think that the other listed funds, Marlin Global and Barramundi have the same fee structure.

The three listed funds have not done well in the past 30 months, but they seem to share that with lots of other investors.

Comparatively speaking, Barramundi made quite a lot of high growth, higher risk investments like Arrow Energy (AOE) when Warren Couillault was involved, but with his exit, the investment side became more disciplined.

I think the jury is still out on the long term performance of Fisher Funds Management Limited but I have a positive feeling that they will perform solidly over time.