The fund was launched in 2012 and is managed independently of a benchmark. This concentrated strategy invests only in the least volatile businesses that can offer greater resilience than the broader equities market.
High conviction portfolio of 25-30 businesses which are likely to prove more resilient across the cycle
A focus on value opportunities amongst non-cyclical companies, targeting parts of the market that have temporarily fallen out of favour
Investing in companies with high sustainable returns on capital with the aim of delivering CPI +6%
November 2018 - Latest commentary
Global markets rose a couple of points in USD terms, driven by the US and Asia on the back of the results from the US mid-term elections, positive comments by the Fed, and the resumption of US-China trade talks. The UK was a big underperformer as GBP suffered in the final stages of the Brexit negotiations. The pre-agreement that was ultimately reached provided only limited relief. Sentiment in Europe was further affected by weak GDP figures in Germany and budget tensions between Rome and Brussels.
The USD continued its climb on the back of the expectation of a December rate rise, while the Oil price fell all the way to $58 as Trump encouraged Riyadh not to cut oil production. In this environment utilities, healthcare, telecoms and industrials performed the best with energy, materials and IT lagging the overall market.
The Fund delivered positive absolute returns, beating both its CPI benchmark and the broader world equity market. With a steep fall in popular tech stocks our fund benefited by avoiding growth tech stocks, including Apple, NVidia and Facebook. Our top contributor was UnitedHealth that continued its decade-long journey to higher revenues and higher profitability on the back of its OptumRx business. Ahold-Delhaize also delivered strong returns as the retailer carved itself a defensible value proposition in the highly competitive US grocery retail industry. Elsewhere, Willis Towers Watson, Medtronic and Express Scripts were also notable contributors.
Conversely the fund was held back by our consumer staples companies in the form of our Tobacco holdings. BATS and Imperial were hit by the regulatory measures being considered by the FDA for flavoured smoke products, including menthol, big categories for both businesses. While this adds to short term uncertainty, long term we remain firm believers in the economic power of Tobacco companies and their ability to adapt to next generation products. Paying trough multiples confers our theses a significant margin of safety.
Additionally, Cielo, a recent investment, was also a notable detractor as the competitive environment in its home market of Brazil intensified meaningfully. The company’s dominance and solid balance sheet coupled with the stock’s exceptionally low price continue to underpin our investment case.
Previous months’ commentaries are contained within the fund factsheets.