Portfolio Manager comment Coeli Global Select January 2021

The month of January offered large market fluctuations that brought relatively sizeable share price changes along for the ride. Coeli Global Select’s development during the month was -1.84 percent, which was 2.15 pp worse than our benchmark. In spite of this, the shortfall was manageable thanks to the fund’s particularly strong returns in 2020. Thermo Fisher, ASML, TSMC, and John Deere were the holdings that contributed most positively during January, while Global Payment, Fiserv, adidas, and Pagseguro were weaker. Fifteen of our holdings have now reported and the strongest among them are found in the tech, semiconductor, and healthcare sectors. We note the lack of semiconductors across the globe, predominately in the vehicle industry – a fact that is advantageous for our semiconductor holdings.

Key market events and trends

We welcome the inauguration of Joe Biden as the new US President and celebrate that the world’s strongest economy can now return to the global environmental initiative. Our global fund has been bolstered by Treasury Secretary Janet Yellen’s proposal for a stimulus package of USD 1,900bn, which would be a powerful move by the US to prevent the country from sliding into recession. Likewise, her statement that she is in favour of a weaker dollar to expedite US exports. The world’s economies should also see positive movements when coronavirus vaccinations are rolled out on a larger scale, implying a restart and recovery for many countries.

One recent phenomenon, which has hit US hedge funds most of all, has been the joining of day traders on internet forums sush as Reddit and their subsequent synchronised buying of stocks that have been heavily shorted by hedge funds. The result for the hedge funds has been a so-called ”short squeeze”, with share prices in these stocks rising sharply when the hedge funds needed to buy them back to cover their short positions. When there is a limited supply of stocks for sale and a surplus of buyers, the share price shoots up, which can lead to large share price movements in a short time. Two companies whose stocks have been subject to this phenomenon are the US’s Gamestop and Finland’s Nokia. Those shorting them have paid the price. This is not something that could affect Coeli Global Select though, as we never short stocks.

Portfolio changes

During January, we sold off one of our Special Situations stocks, JPMorgan Chase, following an uptick of some 25 percent.  In its place, we bought semiconductor manufacturer Intel, which also falls into the Special Situations category – stocks for which we see 50 percent upside potential in 12-18 months. The share trades at a P/E of 13x, which we consider too cheap given the shortage of semiconductors across the globe and that only a handful of companies are capable of manufacturing, the most advanced semiconductors. In our view, Intel should at the very least be valued at a P/E of 20x, which would imply upside of 50 percent from here. Moreover, Intel is also undergoing a restructuring programme that will leave the company even leaner and more profitable.

We have also sold two Champions, Visa and Global Payment, to allow room for a new Champion stock. Paypal is one of the world’s largest e-trade and online payment companies. We see it as a highly interesting competitor to Klarna and will keenly follow its journey in now offering trade and storage of bitcoin.

The fund’s positioning

We see a good balance in the fund between our Champions, which are dependable growth companies, and our Special Situations, those companies on the cusp of positive change with high profit potential. We are overjoyed with the stock market year that 2020 represented, and we now step further into 2021 with Coeli Global Select still offering an appealing and high-quality mix of the world’s finest companies.