The Esk Global Equity Fund had a quietly positive month overall but this disguises a great deal of volatility at the individual stock level.
The month, traditionally the quietest of the year, has generally been positive for equity markets with most rising by around 2%, Shanghai was the outlier with a 5% gain, recovering most of July’s losses though Hong Kong stocks are still struggling in the wake of the Chinese clampdown on tech stocks. It was not all plain sailing though, equities suffered a wobble mid-month as worries mounted over the spread of the delta variant, the approach of Fed tapering and ‘peak growth’, before recovering again.
The only transaction over the period was a modest addition to the holding in Heineken as their stock drifted after figures but, as with markets overall, there was lots of individual volatility among our holdings. Consumer discretionary stocks sold off generally, for us Amazon and LVMH were the most damaging. Amazon recorded a 9% fall after Q2 figures disappointed expectations and their forward guidance was lowered. Revenues were up 27% on last year and earnings by 46%, looking forward they reminded markets of increasingly tough comparisons with last year’s growth and of the logistics difficulties that so many companies are facing. Meanwhile, Cloud goes from strength to strength with Amazon Web Services showing 37% growth. LVMH fell 10% in the wake of concerns over China’s crackdown on their tech companies. This was also a concern for mining stocks as the price of iron ore fell sharply, worrying about the potential impact on Chinese growth, Rio Tinto fell by 11%.
Within the pharmaceutical and healthcare holding, GN Store Nord’s figures were deemed disappointing, Q2 sales in hearing aids was close to double that of Q2 last year, but the revenue growth of 32% in GN Audio was lower than expected and the stock fell sharply. In contrast, Lonza Group continued their winning streak, gaining a further 11%. Our largest holding in the sector, Roche, made further headway with a 5% gain on the month. The technology holdings had a good month with out-performance from Alphabet, Intuit and Microsoft – it was only really Mastercard that sold-off (with the consumer discretionary stocks). For a pleasant change, and in a bit of a contrast to the other more economically sensitive sectors, we saw good returns from all of our holdings in financials. Morgan Stanley, Euronext and T Rowe Price all rose by 8% or more and Everest RE by 12%, no real common theme to report there.