European markets were again weaker in September, as focus shifted back onto macro issues such as US/China tariff wars, Italian budget deficit levels and deal/no deal for Brexit.
The fund’s performance was also slightly down over the month. In terms of positive share price performance, Grieg Seafood continued to perform strongly, as structural supply constraints in the salmon market continue to benefit the company. Subsea 7 also performed well. We remain confident that the medium-term prospects for oil services companies such as Subsea are good, as Oil Majors revisit capex plans following several years of low investment levels. Leonardo, the Italian defence and aerospace company also performed well, following a significant contract win for its Helicopter division. On the negative side, Naturhouse Health, the diet and nutritional specialist’s shares were weak, following the payment of its significantly sized interim dividend. VAT Group, the world-leading supplier of vacuum technologies to semiconductor manufacturers was also weak, on concerns that the semiconductor cycle continues to slow. We took advantage of short term weakness to add to the position. Kaufman and Broad, the French housebuilder, was also weak. The company subsequently reported strong results, which should allay some concerns regarding the French housing cycle.
In terms of investment activity, we took profits in DNB. DNB has noticeably outperformed Financials generally, and we took the decision to recycle our profits into our other holdings. We also sold our investment in BB Biotech. The Swiss Biotech investment vehicle is now valued at a significant premium to NAV, and better opportunities exist elsewhere. We added to a number of our existing holdings, including Data Respons, Ringmetal, Bayer, ING, UBS, Unicredit and VAT Group, where we continue to see excellent upside opportunities.