Portfolio Manager comment Coeli Global Select august 2022

An exceptionally strong month, such as July was, is often followed by a slightly weaker one. Coeli Global Select’s NAV for August was down -5.05%, which was 2,74 percentage points below our benchmark. August was not a bad month for equities per se, but the unease about inflation and how it will affect consumers persisted in the stock market.

The strongest performers for us during the month were Pagseguro, Siegfried Holding, and Kotak Mahindra Bank. Those showing a weaker performance during August were Sonova, Truecaller, and Fortnox. We noted with some satisfaction that two emerging markets stocks were among our three best performers of the month, which shows the breadth of our portfolio. Our Brazilian payments company, Pagseguro, issued a particularly solid report despite the taxing macro environment. Swiss contract manufacturer Siegfried Holding also pleased the market with an impressive report. It is worth noting that our Indian banks, HDFC Bank and Kotak Mahindra Bank, are providing a favourable diversification effect for the portfolio with both on a plus year-to-date. India is now out the other side of the coronavirus pandemic and lending to companies and consumers alike is growing again.

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

With more than 60 quarterly reports and presentations under our belt this summer, we can conclude that the views of companies and the stock market are not aligned. Companies are positive, seeing sales rolling on without a blip on the radar, and they are looking to grow through new acquisition opportunities. Very few of the companies that reported are experiencing major issues. Those who reported the weakest results sell directly to consumers. Those selling B2B, on the other hand, delivered solid reports with rising sales and robust order books. Manufacturing companies had experienced increasing materials costs but now saw a slowdown in these price increases.

Comparing what companies stated during reporting season with the negative macro picture offered by market rates, consumer confidence and purchasing managers’ indices, etc, we can clearly see a difference. We believe companies are taking a sunnier view of the economy than the macro economists are portraying.

The American interest rate market has two rather large interest rate increases during the summer behind it. Although Jerome Powell was reasonably hawkish (positive on raising rates) in his speech following the meeting at Jackson Hole, we believe the central banks will be cautious on lifting interest rates. Raising them too high, too fast would run the risk of “killing” the economy. We as consumers are in a tough spot, with expensive interest rates on loans, higher fuel costs, and other price increases that affect our disposable income. Jerome Powell appears determined to bring inflation down to the Fed’s goal of 2%.

Portfolio changes

There were no changes during the month.

The fund’s positioning – our market expectations

We continue to add to our Champions, with their dynamic business models that can weather these slightly tougher times. We still see much upside in our portfolio given the lower share prices. We’d like to remind you that monthly savings plans are a great way to ride the wave of weak stock markets since continuous buying can be favourable when the markets pick back up again.

News

We have started a new global small cap fund, called Coeli Global Small Cap Select. Click here to read more about the fund.