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Investor Information

monthly manager commentary

October 2019

European markets were lower generally over the month. Focus has switched from macroeconomic issues to company results. Results have been mixed, though there are tentative signs that some of the more economically sensitive areas of the market are starting to see some stabilisation of demand.

The fund was flat, in performance terms, over the month. Positive results from some of the fund’s industrial businesses, including Hexpol (advanced polymer compound producer), Valmet (equipment and services to the pulp and energy markets), and BE Semiconductor (packaging equipment for semiconductor industry) drove good share price performance. Bank of Ireland, and D’Ieteren (a recent addition to the fund) also performed strongly over the month.

On the negative side, Subsea 7 (oil services) was weaker, as continued lower oil prices are delaying the expected capex increases from oil producers. This feels like a timing issue, and with the stock trading at a material discount to book value and with a net cash balance sheet, we took advantage of the recent weakness and added to our holding. Kaufman and Broad, the French housebuilder, was also weaker over the month, on short term concerns about disruption to planning from the upcoming French Municipal elections. Having spoken to the company, we feel that this is a short-term timing issue, rather than a fundamental concern and remain very comfortable with our investment.

The fund made one new purchase over the month. Recticel specialises in polyurethane processing. It is streamlining its operations, following a failed attempt by a competitor to buy the business. Growth prospects are good for the insulation business which the company will focus on, and the free cashflow yield is attractive at almost 7%.

The fund took profits in Bravida, exiting the holding. Recent strong share price performance at the Swedish heating ventilation and electricity specialist has driven the valuation up to less attractive levels and it was felt that we had better opportunities elsewhere. We also sold Aubay from our IT services cluster, adding to other existing holdings in the area on more attractive valuations.

Archive

September 2019

European markets were stronger in September. Macro news was again in focus, with positive noises being made by both the US and China regarding potential trade talks. Also, the ECB announced a restart to its bond-buying programme, and there were a number of comments regarding the potential for fiscal stimulus to be increased in a number of countries[…]

August 2019

European markets were weaker in August. The on-off nature of trade talks and the ensuing tariff escalation between US and China dominated market sentiment. Markets remained volatile, but ultimately were down over the month. In this environment, it was again the less economically sensitive areas of the market which held up better, with Consumer Non-[…]

July 2019

European markets recorded modest gains throughout July. The market was predominantly focussed on the company reporting season which got underway during the month. Company results have been mixed, with more economically sensitive/cyclical businesses generally alluding to market conditions becoming tougher. The fund also recorded modest gains over t[…]

June 2019

European markets rebounded strongly in June, recouping much of their losses from May. Mario Draghi’s dovish comments regarding potential future ECB interest rate cuts were taken positively. Hopes of a resolution to the current US China trade dispute were also heightened ahead of the meeting between Donald Trump and Mr Xi, taking place at the G20 su[…]

May 2019

European markets were weaker during May. Focus returned to macro/global issues. The trade war between the US and China escalated. The fund was also down over the month. The largest detractor was our holding in Post NL, which reacted poorly to news that, although its parcels business was enjoying strong growth, there was a requirement for increased[…]

April 2019

European markets were strong during April. Company reporting season dominated attention. Generally, results were positive, with a significant proportion of companies reporting increased sales and profitability, despite the rather subdued macroeconomic data of recent months. The fund enjoyed a strong performance during the month, led by good perf[…]

March 2019

European markets were somewhat subdued over the month. The ECB substantially downgraded its growth forecasts for the Eurozone, now seeing annual GDP growth of just 1.1% in 2019, 1.6% in 2020 and 1.5% in 2021. As recently as December 2018, the growth forecast for 2019 had been 1.7%. This significant reduction in the outlook was the main reason why t[…]

February 2019

European markets continued to rise during February. There was little in the way of new geo-political news to disrupt markets – and markets remain hopeful that US-China tariffs will be reduced going forward. February was a busy month for companies reporting. The results season also acted as a positive catalyst for markets, with the majority of compa[…]

January 2019

European markets had a strong start to the year. Many stocks/areas of the market which were indiscriminately sold during the final quarter recovered, at least to some extent. There was also less in the way of poor macro-economic newsflow for markets to contend with – for example US/China trade talks are ongoing and the rhetoric is, so far, mildly p[…]