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MI Chelverton European Select Fund – Monthly Manager Commentary – April 2021

MI Chelverton European Select Fund – Monthly Manager Commentary – April 2021

European markets posted positive gains during April. Focus over the month was firmly upon the first quarter results season, which has generally been taken positively by markets. Stylistically, growth outperformed value over the month, reversing some of the strong gains by value seen year to date.

The fund enjoyed a solid month in terms of performance. Much of the individual stock performance was driven by positive first quarter trading updates.

The positive updates came across a range of sectors. Caverion (building services), Media and Games Invest (gaming and marketing services), KnowIT (IT services), Amadeus Fire (recruitment and training) and Artefact (digital marketing) all featured as having good trading updates, accompanied by strong share price performances over the month.

Detractors from performance included AMS (semiconductor sensors), where shares fell over concerns of losing a long-term client. This potential loss of business has already been largely factored into analysts’ forecasts, so we added to our small position on weakness. Proact IT (cloud services) was also weaker over the month due mainly to one of its smaller division’s poor performance. Elsewhere, trading was generally positive. We took advantage of the share price weakness to add to our position.

New holdings over the month included TietoEvry, a leading Scandinavian provider of IT services and software. The prospects for the group are good, and the company is projected to have a dividend yield in excess of 5%. This, combined with a free cashflow yield which is around double that of the broader market, the valuation is attractive. TXT e-solutions is another new holding. TXT has a range of software products for the aerospace industry, aimed at design, training and route-optimisation. It also has a number of fintech oriented businesses, and together with a strong balance sheet appears very undervalued. We have initiated with a small position in TXT.

Over the month we sold our holding in Bayer (agri-chemicals and pharmaceuticals). The share price had recovered somewhat from the lows seen in the final quarter of 2020 and it was felt that we have more attractive opportunities elsewhere in the portfolio. We added to a number of our more focussed pharmaceutical holdings with the proceeds from the sale.