Bath/Head Office & Unquoted Equity Team:
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Edinburgh Office & European Quoted Equity Team:
MI Chelverton European Select Fund – Monthly Manager Commentary – December 2018

MI Chelverton European Select Fund – Monthly Manager Commentary – December 2018

European markets fared poorly during December. The ongoing uncertainty caused by a number of macroeconomic issues (cyclical fears, trade wars, geopolitical uncertainty etc) continues to weigh on sentiment. There was a continued rotation towards perceived safe havens – companies which are less correlated to any form of economic cycle. Elsewhere, the sell-off was fairly indiscriminate, with many companies suffering significant share price contractions, despite no newsflow.

The fund was also down over the month. Our oil service holdings continued to perform poorly, following a further significant fall in the price of crude. We continue to believe that there is good value in this area, and are prepared to take a longer term view. Our worst contributor to performance was our holding in Post NL, which fell despite little in the way of newsflow. The company trades on a forward PE of sub 6x, with a double-digit free cashflow yield, a net cash balance sheet and a current double-digit dividend yield.

In terms of investment activity, we sold our holding in Niloerngruppen, concerned that the trading environment for a business exposed to clothing labelling and packaging may well deteriorate from here. Elsewhere, we took advantage of the recent sell off to add to a number of our existing holdings.