Portfolio Manager comment Coeli Global Select July 2019
July proved a good month for our fund, which rose in value by 2.7 percent (share class R EUR). This was 0.3 percentage points better than our benchmark. Positive news included a continued robust increase in our Brazilian holding Magazine Luiza, which we highlight is now up around 300 percent since we bought it some two years ago. Sweden’s AAK was also a big positive contributor during the month, with the share up by around 60 percent year-to-date. The company’s focus on speciality fats and management’s excellent communication with the stock market continue to create solid shareholder value. On the negative side it was largely our investments in Indian banks that played against us. Many banks in India are cleaning up their bad loan portfolios, and our well-run holdings HDFC and RBL are also being dragged down by this. We believe we are soon at the peak of this Indian economic clean-up and when the turn comes we’ll see a long period of increases ahead.
Key market events and trends affecting performance
The stimuli are helping. A year ago we started writing that the global economy was slowing down, and last autumn, interest rate increase in the US and the worsening Chinese car market caused a clear downturn in global stock exchanges. Early in 2019 the Fed made a 180° turn and we are now in a global interest rate cut cycle (congratulations to all those with variable interest rates on their mortgages!). We can already see the positive effects of this policy in the US housing market, and our US construction-related holding GMS, for example, has seen a sizeable increase in value. We are certainly also nearing the trough for the Chinese car market and provided there are no larger negative macro effects, we should start to see that the worst is behind it. We do not anticipate any upward rush in global industrials in the style of 2018 but rather a stabilisation being on the cards.
In line with our arguments above, we made some changes during July to the Special Situations part of the fund, away from Axos Financials (a US bank) and into Sweden’s Sandvik (a leading capital goods company). Sandvik is cheap, well-run and has a formidable balance sheet. If global industrials do stabilise in the coming months, the stock will perform well. We also bought into Denmark’s Vestas, a company that will, by 2021, see around half of its operating profit from its service division. Such a company should trade considerably higher than it currently does.
The fund’s positioning
The fund’s positioning is, in principle, unchanged from the previous month. Our portfolio is still well placed in the market.
Coeli Global Select R-EUR
|Performance in Share Class Currency||1 Mth||YTD||3 yrs||Since incep|
|Coeli Global Select – R EUR||2.66%||21.81%||36.89%||59.90%|
DISCLAIMER. The information provided here does not constitute professional financial advice. Past performance is not a guarantee of future returns. The price of the investment may go up or down and an investor may not get back the amount originally invested. The key investor information document (KIID) and prospectus are available at www.coeli.se.