Portfolio Manager comment Coeli Global Select June 2019
During June, most of the fund moved in the right direction apart from one factor: the ruling majority in Berlin proposed that rents in the city should not be raised for the coming five years. Rumours had circulated that the politicians would do something to appease those who protested earlier this year, but we had not anticipated that it would be something this drastic. We don’t think that the politicians will succeed in passing this into law, but the damage is already done, and we expect slower property price increases in Berlin as a result of this.
In the wake of what has happened in Berlin, our fund underperformed the benchmark during the month when it rose 2.9 percent, which was 1.8 percent worse than the index. The drop in German real estate stocks led to a negative impact of around a -1.5 percent.
Key market events and trends affecting performance
So so. That’s how we see the global market conditions ahead, with quite a long period with a relatively weak growth environment, where cyclical growth has vanished but the long-term trends remain intact. On the positive side, a global rate cut cycle has begun, which will create new demand for cyclical goods, but in general we won’t see a 2018-style party again for some time. In this environment it will be essential to only own stocks with enduring solid profit elements.
During June, we made a few changes to the German portion of our fund. The problems in the German real estate sector led us to sell Deutsche Wohnen, a share we had owned for more than four years and that had performed more than 100 percent. We still have in excess of 10 percent exposure to this sector, so it felt good to sell the stock exposed to the most political pressure. Following an upturn of plus 200 percent over three years we also sold payment firm Wirecard. Instead we invested the money from these two stocks in another German “champion” called Adidas – a brand everyone will recognise. After many decades of Nike’s dominance in the USA, Adidas has begun to take market share, creating both strong sales momentum and exceptional margin growth. The company is also growing rapidly in China, and during the first quarter of 2019 profit was up by 19 percent despite very tough comparables from the previous year. Its balance sheet is particularly robust, with almost EUR 1bn in net cash. In addition to Adidas, we also took an initial position in US tech company Adobe, whose products you certainly use every day when you read a pdf or work in Photoshop. We visited the company earlier in the year and after a follow-up discussion, we took a stake.
The fund’s positioning
The positioning of the fund is in principle unchanged from the previous month. Our portfolio of the world’s finest companies is well-placed in the market and we look forward to reporting season in a few weeks when our portfolio of “the world’s finest companies” again demonstrate their strong profit trends.
Coeli Global Select R-EUR
|Performance in Share Class Currency||1 Mth||YTD||3 yrs||Since incep|
|Coeli Global Select – R EUR||2.91%||18.66%||41.55%||55.76%|
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.