Monthly management comment
Macro & Politics: “ Central banks are in control ”
Recent macro-figures such as market confidence, ISM manufactural, job creations are all showing a stronger and swifter than expected rebound in the US and in Europe. Latest Chinese figures are also very encouraging. In today’s world focusing only on the good news and ignoring whatever could spoil our comfortable certainties, they are contributing to the general “feel good” mood. Breaking the Hong Kong democracy is apparently irrelevant nowadays.
And in the midst of this environment, the US presidential election is growing closer. A potential Democratic President who will bring higher taxes is not a big issue neither.
Finally, Christine Lagarde states that Europe is in a disinflationary period and that expectations are for continued low inflation for several
years as the economy adjusts. We always feel unease when hearing such bold and certain predictions but as they say: “don’t fight the Fed”.
Markets & Investment decisions: “Astonishing quarterly performances of the main Equity indices ”
Despite current pandemic and current recession, the S&P 500 returned 20.55% and the Nasdaq + 30.95% in 2Q. These quarterly figures were amongst the best top 5 quarterly performance ever. (Following one of the worse quarterly returns ever) Returns were also great in Europe with the DAX up 23.9% last quarter (best figure since 2003). The Eurostoxx 50, our Equity benchmark regained 6 % in June but is still down 13,7% YTD. As markets continue to swing from one extreme to another we continue to carefully disinvest from overly leveraged companies and allocate into strong balance sheets and market leaders in different niches. Aulien was up 1.4% for the month and is – 1.3% YTD.
The current liquidity tsunami does create “zombies” and one should carefully avoid companies with no chance of surviving once governments withdraw their various aids.
Some of our stock picking has provided generous returns (Stilffront +127% YTD, Evolution +97% YTD, Leo Vegas +41.2% YTD). We have taken some profits (Leo and Kinnevik) in order to build ammunition again in case of an eventual correction.
Valuations are stretched but we are looking to add quality names such as ABB (Robotics, good management), Swissquote, Tomra (Plastic recycling), Novo Nordisk (Diabetes), Essity (Special tissues) and some promising healthcare discoveries. Our current favourite picks are: Gold, Enea (New 5G contracts have been signed in Germany and the US, DNB has initiated a coverage) and Novartis (Close to a strong resistance).