Portfolio Manager comment Coeli Global Select April 2023

Coeli Global Select returned 0.24% during April, beating the benchmark index by 0.29 percentage points.

The stocks that performed mostly strongly during the month were Atlas Copco, HCA, and Kotak Mahindra. Meanwhile, the weakest performers were MSCI, Beijer Ref, and ASM International. Apart from Beijer Ref, the stocks’ development reflects the quarterly reports the companies delivered during April. The reports from both Atlas Copco and HCA (a US hospital chain) far overshot expectations, and they truly deserved their share price surges. Since my time as an analyst, I have followed Atlas Copco every quarter since 2012, and I’ve seen that after a mediocre report (like the previous quarter’s), the company has then issued a superb one. And this latest quarter was no exception. The report from the financial services firm MSCI was good overall but also revealed that its ESG services have, unfortunately, seen a decline in demand, most notably in Europe. ASM International’s report showed postponements to some orders for its products. This was not entirely unexpected, and ASM’s stock is now already back in the neighborhood of its pre-report price level.

Key market events and trends (what has influenced performance most?)

Early in May, the Fed made a further increase of 0.25 percentage points in the Fed Funds target rate. We believe this to be the last or penultimate hike from the Fed in this cycle. The same is probably true of a number of other central banks, which are also nearing the end of the cycle. We base our view on the four percentage point decrease in inflation in the US from the peak in June 2022. The latest reading of inflation in the US was in April at around 5%. The other reason we believe the Fed is nearing the peak of its interest rate increases is that several US regional banks have been severely hampered by the rapid rise in the policy rate. Partly, it is their exposure to real estate companies that is being questioned, but also that many banks have not invested their own liquidity funds well. And when their customers have become suspicious, believing the banks could fail, they have pulled out their savings, prompting a bank run. In our digital world, with its possibility of rapid transactions, bank runs can occur exceedingly fast. In the case of Silicon Valley Bank, 75% of its customers’ deposits were withdrawn in just 36 hours. We can only hope that this crisis of credibility in US regional banks blows quickly over so the stock market is not tarnished by these same concerns.

On the positive side of the scale comes the news that China is opening up in earnest and will want to do business across the world again, with Chinese people starting to travel more than ever before. Getting China back in the global supply chains is important for suppressing inflation. Remember that inflation started to rise in 2021 because supply chains collapsed as a consequence of the world closing up during the coronavirus pandemic.

The fall in the market rates is providing support for share valuations and stock prices, meaning we anticipate robust equity markets in the coming years.

Portfolio changes

We made no changes to the fund during April.

The fund’s positioning—our market expectations

We started the year with a stock portfolio of the World’s Finest Companies, featuring some of the world’s strongest brands, built by companies offering good growth and low debt. We are happy to see this portfolio delivering according to plan and we are extremely enthusiastic about the coming years.