The Russian invasion of Ukraine has dominated markets, sending indices sharply lower.
The fund was also down over the month. We do not invest in companies which are domiciled in Russia or any of the former Soviet countries. However, we are clearly not unaffected by large geopolitical events such as this. We continue to monitor all of our companies diligently.
There were positive share price performances of a number of companies within the portfolio. Be Shaping the Future (IT services) received a bid approach from Bain Capital at a significant premium to the underlying share price. Recticel (insulation), UCB (pharma) and Kinepolis (cinema operator) all produced very strong results, sending their shares higher over the month.
In terms of detractors, Prosus (technology) was weak, affected by concerns over how China will respond to the Russian invasion. Our two financial holdings (ING and Svenska Handlesbanken) were also lower as potential implications of the financial sanctions imposed on Russia were digested by markets. Huddly (software-enabled meeting room equipment) was also lower, despite producing reassuring results and confirming a strong net cash balance sheet.
Over the month, we sold Relx (publishing and exhibitions) and Ahold (food retail) as they had run out of valuation support, and we wanted to redeploy capital in some of our smaller, more attractively valued holdings.
Our strategy over the month was very much ‘business as usual’ – trying to take advantage of opportunities where our companies’ share prices had been marked down indiscriminately. Just as we did not ‘chase’ the rotation into deeper value companies at the start of the year, we also did not chase the clamour for energy and defence companies which occurred during February. In times of stress, financial and otherwise, we remain committed to our valuation discipline, focussing on businesses with strong balance sheets, good prospects for growth and good cash generation, which are not being valued appropriately by the market.