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

European equity markets began the new year making positive ground, but ended the month lower, as investors became concerned that lockdowns and restrictions would delay economic reflation. There was no discernible style bias over the month between growth and value. The market appears to be marking time ahead of the upcoming company results season.

The fund posted a modestly positive return over the month. Media and Games Invest (online gaming and marketing) was the strongest performer following a transformative acquisition, and news that a well respected private equity business had taken a 9% equity stake in the company. The fund’s semiconductor holdings, ASM International and BE Semiconductor, were also good performers over the month. Away from technology-related companies, there were also good share price appreciations from more traditional businesses – Signify (lighting) and BPost (Belgian mail and parcel service provider) of particular note. Detractors from performance included our financial holdings, which are seen as obvious reflation plays, hence not surprisingly they were generally weaker. TGS Nopec (oil services) was weaker on concerns that the Biden administration in the US could slow exploration permit grants in the US. Barco, a technology play, offering solutions for the cinema, medical, corporate and entertainment industries was also lower, despite results which confirmed the early stages of demand pick up in most of its markets.

Two new holdings were added during the month. Init specialises in technology solutions for public transport operators, including planning, ticketing, and fleet monitoring. It is targeting 15% organic growth yet is still valued on a higher free cashflow yield than the market. Banca Ifis is a play on Italian economic recovery. It purchases deeply discounted non-performing loans from other financial institutions and also provides loans and factoring services to smaller companies, based in northern Italy. We initiated with a small position, given that the current valuation is at a very significant discount to book value.