Portfolio Manager comment Coeli Global Select February 2019

Similar to January, February was a good month, with large increases in the world’s equity markets. The risk appetite in the market has remained strong. We are probably nearing the end of the last two months’ relief rally, the reason being that stocks are starting to return to normal valuation levels. During February, our global fund rose by 3.51 percent, which was 0.22 pp better than our benchmark index. The best returns came from payment firms Global Payment and Worldpay and from cosmetics company Estée Lauder. The negative contributions stemmed from United Health Group, Adler Real Estate and Banco Macro. Elsewhere, the comeback in our technology holdings in the payment sector provided a decent contribution to returns.

During the month, we travelled to San Francisco and took part in Goldman Sachs’ renowned equity conference for tech companies. What makes the event special is that it is held in proximity to Silicon Valley, with all the noteworthy tech firms attending and presenting their businesses. We met Facebook, Microsoft, Adobe, Electronic Arts, AMD and many other exciting companies. Right now, we are looking for new tech sector investment opportunities for the fund and it could very well be that we invest in a Silicon Valley company. During February, we were also guests on CMC Markets’ Björnfällan podcast, so please do listen to episode 66 to learn more about the fund and us as managers (the podcast is in Swedish).

Key market events and trends affecting performance
We had hoped that the meeting between the US and North Korea in Vietnam would offer a general geopolitical boost to returns in February, but instead the equity markets saw a sideways movement. Unfortunately, there was no other news about the trade conflict between the US and China either, leaving us waiting for a possible positive impact. In the coming months, we anticipate that companies’ communication with the market will be consequential for stock market performance. The news we want is that companies continue to make sales and earn money so that share prices keep on rising. The central banks seem to have “got the point” and will take it easy with hikes, which could stimulate the stock markets.

Portfolio changes
During the month, we said yes to YES Bank, an exciting Indian bank that we’ve taken in as a new “special situation”. We’d previously met the bank twice in Mumbai, but we considered the stock too expensive then. Now it has come down to a cheap valuation, making it interesting enough for us to invest in. During the month we said farewell to two “special situations”: American Express and ASML, which had done their job and earned us money.

The fund’s positioning
In selling these two “special situations” we have taken down cyclical exposure somewhat. If we reach more targets in our “special situations”, the cyclical risk in the fund will diminish further.

For those of you interested in more information about Coeli Global Select and how we manage the fund, we are planning a quarterly presentation where participants can ask us questions. Keep an eye out – more information to follow!