Monthly management comment
Macro & Politics: “The next inevitable slow-down just around the corner?”
The latest reported economic aggregates are showing an over board weak-ening of the current cycle. As always, it has triggered many worries and questions: is it a temporary pause before getting a second breath, what are the consequences on the central banks policies, could we face stagnation or recession combined with inflation? While the numbers are effectively cooling, they still remain in solid territory specially in the US. Powell’s new recent dovish tone is what we were hoping but is construed by the pessimists as the sign of a major GDP decline. We remain slightly more positive than consen-sus even tough clouds remain such as the persistent trade tensions between China and the US highlighted by the arrest of Huawei’s CFO in Canada yesterday. We also worry about the never-ending Brexit saga, the uncer-tainties surrounding the Italian Budget and the spectacular recent riots in France.
Markets: “The slide continues”
The post earnings relief was short lived and markets have now dropped back to levels close to their lows seen in October. The Eurostoxx 50 is now down -13.1% YTD, the DAX- 16.3% and Dow Jones and S&P 500 are more or less flat. Aulien is down 5.9% YTD. Spreads in corporate and high yield bonds have recently risen also taken their toll on bond performances. There are few safe places to hide for the time being but there is a clear trend of investors increased appetite for defensive stocks such as health care and some consumer staples. We have been caught a bit of guard with recent turmoil but have managed to reduce some of the risk by cutting some of the Equity exposure late October. Still, there are positive signs with some hold-ings showing positive performances despite recent turmoil (Tomra up more than 10% since October, Essity also up +11.6%). It is worth noting that per-formance dispersion between stocks has recently been very high: Intuitive surgical is still up 45 % YTD, Tomra is up 77.6% while AMS AG is down – 69% and Boliden -27%.
Investment Themes & Favorite stocks: “AMS, Axa, Novo Nordisk”
AMS, a swiss designer and manufacturer of high-performance sensor. The stock has dropped from CHF 120 to currently approx. 23 CHF on the back of probable revenue losses from Apple a major customer. Nevertheless, we feel that the stock correction is exaggerated and that it presents a good opportunity to enter in a fast-growing business with forthcoming opportunities in areas such as the automotive industry.
Novo Nordisk, world leading provider of insulin. Defensive stock with innovat-ing oral products in the pipe-line. The stock has recently outperformed and shows technical strength.
Axa, improved visibility, cheap valuation, high dividend.