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

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

European markets were broadly positive in June. At the macro level, inflation concerns were still apparent, though markets generally appeared to conclude that significant inflation risk in the medium term was relatively low, hence the positive move. From a stylistic perspective, June saw a significant resurgence of growth over value, as a result of the aforementioned inflation concerns receding.

The fund also had a positive month. 

In terms of individual names, there were strong performances from some of our smaller companies. Limes (mental wellbeing/health clinics), Artefact (digital marketing/media), Media and Games (gaming and digital marketing) and Digital Value (IT services) all had strong positive contributions to the month’s performance. Also, from a sector perspective, our pharmaceutical holdings enjoyed a solid performance, having previously underperformed for some months.

The main detractors from performance were Cliq Digital (media streaming) and Recticel (Insulation and technical foams). There was no adverse newsflow with either company, simply profit-taking following strong recent share price performances.

Over the month we sold two holdings. Valmet (industrial services and automation) has performed very strongly and subsequently had run out of valuation support and Grieg Seafood (salmon farming) where governance concerns and higher than average leverage made the investment case less attractive.

We added two new holdings over the month. CTAC is a Dutch based IT services company. The company has good growth prospects, no debt and a free cashflow yield approaching double digits. Koninklijke Boskalis Westminster provides marine services including dredging and offshore energy services for renewable energy projects. It has no debt, and a very strong orderbook. Although cyclical, we estimate Boskalis to be on a through cycle free cashflow yield in excess of 7%.