In January, we wrote that the market was concerned about further lockdowns causing a delay to economic recovery. In February the reverse was true. Market concerns switched 180 degrees to the worry that inflation could return. Bond prices were sent lower and benchmark 10-year yields climbed strongly. This had the effect of driving a marked underperformance by growth versus value, with sectors such as Energy and Financials being notable beneficiaries of this.
The fund enjoyed a positive month. Aside from the broader issues described above, our focus was firmly on results season. During the month, the majority of our holdings reported full year results, and were generally well received by the market. Of particular note, in performance terms, were strong contributions from Cliq Digital (online streaming services) and Media and Games Invest (owner and developer of mass market online games). Our financial holdings also had a positive contribution to performance, with ING and Banca Ifis having notable positive contributions. There were also positive results from a number of our IT Service companies, an area we remain very excited about going forward. On this theme, Siili Solutions and Ordina were both noteworthy contributors to performance on the back of positive results and remain very attractively valued. Detractors from performance included Caverion, a Scandinavian building services business, whose results were affected by Covid lockdowns. More defensive, less inflation-sensitive holdings, such as Pharmaceuticals were also generally weaker.
We received some inflows into the fund over the month and, as this coincided with us generating a number of strong new ideas, we decided tactically to increase the number of holdings towards the top end of our holdings range of 50. New holdings over the month included Kering, where we took advantage of recent share price weakness to establish a position. It is rare to find a luxury branded goods company, with strong growth prospects, valued on a free cashflow yield which is above that of the market. We also purchased Artefact, a French technology focussed digital marketing agency. It is part of a new breed of disruptors to traditional advertising agencies, marrying technology expertise and big-data management with marketing skills and campaign management. We also initiated positions in 3 companies operating in the IT services area – Innofactor in Finland, Digital Value in Italy, and Indra Sistemas in Spain, thus expanding our reach in this sector. We sold our investment in UBS, consolidating our financials holdings.