Portfolio Manager comment Coeli Global Select March 2019
The first quarter of the year has now reached its end and it is once again time to listen to what companies have to report about their markets. We believe that defensive sectors such as real estate, payment firms, healthcare providers and cosmetics companies will report “normal” growth, while cyclical and interest rate sensitive sectors such as capital goods and banks will show weaker results. The market has now come out of the phase of undervaluing equities and companies are beginning to appear normally valued. During March, our global fund was up 2.7 percent, which was 0.01 percentage points under our benchmark index. We scored a hat trick with Indian banks during March, when the three best contributors were RBL Bank, Yes Bank and HDFC Bank. The negative contributions for the month came from three of our “special situations”, all US firms: GMS, United Rentals and Axos Financials.
Among the good things that happened in March, one of our payment companies was the target of a bid. Fidelity National Information Services will take Worldpay off the stock exchange, buying it and merging it into Fidelity’s own organisation. Payment companies remain a strong theme in the fund; three companies in the payments field have contributed the most to our fund’s returns since the beginning of the year.
Key market events and trends affecting performance
A positive surprise for the stock markets was the strong Chinese PMI manufacturing indicator that made a strong rebound which shows increased activity among the Chinese companies. The Shanghai stock market has been one of the best performing markets since the beginning of the year. Another theme that dominates the equity markets’ performance is low long-term bond yields. At present, the short-term US interest rate (2.5 percent) is at the same level as the 10-year US bond yield. In other words, the yield curve is totally flat – usually, the long-term yield lies above the short-term rate. This current situation means that the market doesn’t anticipate inflation. In practical terms, this will provide real assets such as real estate with good earnings from rental income and value increases, along with these companies being able to borrow money cheaply.
During March, we sold Worldpay following the bid on it and instead bought VISA, the world’s largest payment firm. We already own Mastercard, which together with VISA dominates the markets for debit and credit cards globally. Both companies have around the same growth prospects and similar business operations, and we anticipate VISA providing a solid contribution to the fund’s returns.
The fund’s positioning
Positioning in the fund is, in principle, unchanged from the previous month, meaning that we have some 20 percent of the fund in “special situations” and around 80 percent in “champions”. We will sell some of our “special situations” if they reach our predetermined targets prices. As interest rates for home loans have dropped in the US, the house building market there should see a rebound which will affect our special situation stocks most positively.
We would like to thank you for your trust in letting us investing your money! Now we are looking ahead to an interesting quarterly reporting season.
Coeli Global Select R-EUR
|Performance in Share Class Currency||1 Mth||YTD||3 yrs||Since incep|
|Coeli Global Select – R EUR||2.70%||13.43%||39.12%||48.90%|
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.