Portfolio Manager comment Coeli Global Select October 2021

October proved to be a good month that saw our fund up 5.40 percent, although this fell 1.77 percent short of our benchmark. Performance in the fund was widespread; on the positive side, the largest holding, Microsoft, did particularly well in the wake of a robust quarterly report in which profit was up by more than 20 percent. This was especially impressive given that a year ago, it reported a profit increase of 30 percent in the wake of the coronavirus pandemic, and so a further 20 percent rise in profit this year demonstrates how great its products are and its exceptional momentum. Another solid performer was healthcare insurer United Health, which saw an increase in profit of some 30 percent. On the other hand, payment companies Pagseguro and Paypal performed poorly. Both are soon to report, and we expect share price corrections once they do.

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

In our September 2021 newsletter, we explained what the stock market was then concerned about (China, delivery problems, fuel shortages etc.), but the stock markets picked up nonetheless during October. Remember that the markets are always worried about something in the short term, but company profits drive them in the longer term, and often these fears diminish during reporting season as companies get to prove themselves. There is no doubt about the wide-ranging lack of resources in many sectors around the world, but many of these bottlenecks will ease in the coming quarters. In the big picture – which is important to keep an eye on – there is a sizeable labour shortage in the US, which will bring higher inflation and interest rates, but also increased investments in tech and logistics/infrastructure. Another significant trend we can notice is that more and more companies are focused on improving the environment.

Another apparent strong trend is that an increasing number of companies are actively working to combat climate change using new innovative solutions. For example, this month our building materials company SIKA demonstrated that their new process ReC02ver, which makes it possible to recycle concrete. The concrete making process emits significant amounts of carbon dioxide, so to be able to recycle concrete using SIKA: s products is a clear win for the environment. We have owned SIKA for just about five years now, and the investment has increased by some 300 percent, alas we can conclude that great companies often do good things for the society, and they are often also superior long-term investments.

Portfolio changes

We made several changes to the fund during October. We took profit in Dutch firm BAM Group after around a 55 percent performance since our first purchase in the spring (Stocks are like trains: you can hop on and off as many times as you like | Coeli). In its place, we invested in the exciting communications app company Truecaller, in which we acted as anchor investors in its IPO. At the time of writing, this investment is already up by some 70 percent, which is particularly pleasing. Another change we made was to sell US financial outsourcer Fiserv and instead buy into the world’s leading hearing aid provider Sonova, a fine Swiss company. If you’d like to know more about Sonova, we discuss the company in our latest interview on EFN (in Swedish). Listen up! A stock case you need to listen to | EFN.se

The fund’s positioning – our market expectations

On the stock market, there is always one thing that conquers fear: rising profits. And we’ve seen much of this during this Q3 reporting season. By making ongoing portfolio changes, we seek always to ensure our fund is in the right place at the right time, and the holdings represent more than 20 percent in estimated average profit growth, which bodes well when looking ahead to 2022.