WAGTX Commentary (Q3 2020)

September 2020

Periods ended 9/30/20	WAGTX	MSCI ACWI Ex-USA Small-Cap Index*
Quarter	24.21%	10.50%
Year	53.12%	6.97%
3 Years Annualized	11.74%	0.93%
5 Years Annualized	16.80%	6.80%
10 Years Annualized	14.28%	5.31%

A fund’s performance for very short time periods may not be indicative of future performance. Data shows past performance. Past performance is not indicative of future performance and current performance may be lower or higher than the data quoted. The gross fee for the fund is 1.98% for both retail and institutional. For the most recent month-end performance data, visit www.sevencanyonsadvisors.com. Investment returns and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The Advisor may absorb certain Fund expenses, leading to higher total shareholder returns.

DETAILS FROM THE QUARTER

During the September quarter, the Seven Canyons World Innovators Fund (WAGTX) returned 24.21% outperforming our MSCI ACWI ex-US Small Cap benchmark by 13.71%. Since the market bottom in late March, WAGTX has returned 112.59% while the benchmark has only risen 58.86%. We believe our focus on innovative companies has produced our superior returns.

WAGTX is heavily weighted towards secular growth companies with a sustainable competitive advantage. These companies provide superior products or services which lead to market share gains. The stocks which drove our returns during the quarter are providers of online retail, IP telephony, and meal kits. Not only are these businesses benefiting from long-term secular trends, but they are also seeing demand rise due to Covid-related restrictions on traditional channels. We believe that these Covid gains will become permanent, as they represent an acceleration of trends already in place.

AO World (AO/ LN), the biggest contributor to our third quarter returns, is an example of trend acceleration. AO/ LN is an online-only appliance retailer in the UK and Germany. They are benefitting from the shift from appliances being sold in stores to appliances being sold online. Covid spurred this shift as people were unable to purchase appliances in stores. But the shift to online sales had already begun. AO/ LN is the largest and best online appliance retailer, so we expect growth and market share gains to continue.

Gamma Communications (GAMA LN) was also a large contributor to our returns. The company's cloud-based communications services make it easy for users to take work calls and voicemails anywhere, a necessity in a work-from-home (WFH) world.

Meal kit providers Oisix Ra Daichi (3182 JP) in Japan and Marley Spoon (MMM AU) in Australia were other key contributors to our returns during the quarter. They benefit from the intersection of two trends: home delivery of food, and convenient healthy cooking and eating at home.

WAGTX had few losers during the third quarter. The only one worth calling out is Australia-based software provider MNF Group (MNF AU). The company enables enterprise voice over IP telephony as well as calling within apps. For example, if you want to contact your Uber driver, you can do so by tapping the telephone icon in the app. Long term trends in the communication industry favor MNF, and investors expected the company to get an additional boost from Covid-induced working from home. When MNF AU reported June results, the WFH boost disappointed, and the stock gave back gains from earlier in the year. We do not see any fundamental problems with the company however, and are staying the course.

We have started to nibble at companies that have been negatively impacted by Covid, but are long-term market share winners. One example is Volaris (VLRS), a low-cost airline in Mexico. VLRS doubled its market share from 25% to 50% as it filled the vacuum created by competitors pulling back due to Covid-related market disruption.

OUTLOOK

We believe that the biggest impact of Covid is that it accelerated cultural trends at home and in the workplace that were set in motion years ago by the introduction of the “world wide web”. (The name sounds almost hokey now, but that’s what we called it in the beginning.) Our World Innovators Fund has long been positioned to benefit from internet-enabled shifts such as shopping moving from local stores to online, software moving from floppy disks to downloads to cloud services, and voice/video/text communication migrating to data services on mobile phones. We are staying the course by continuing to invest in high quality, well managed, market-share-gaining companies. On the margin, we are deploying capital towards businesses which have been disrupted by Covid but that have improved their competitive position. We continue to believe that companies that can sustainably grow revenues and earnings will become increasingly scarce as the world struggles to grow under the pressure of aging populations and high debt levels. Companies that will outperform are those which are not dependent on broad economic growth, but can grow by taking market share. Our portfolio is built around such companies.

An investor should consider investment objectives, risks, charges and expenses carefully before investing. To obtain a Prospectus, which contains this and other information, visit www.sevencanyonsadvisors.com or call us at +1 (833) 722-6966. Read the prospectus carefully before investing.

Seven Canyons Funds are distributed by ALPS Distributors, Inc.