This period since our last commentary has covered the dip into (apparent) maximum uncertainty to the end of October followed by a much happier tone to date.
Late October saw the worries over the forthcoming US presidential election and rapid surge in COVID-19 rates weigh on equity markets, but the election of Joe Biden, albeit still contested by the incumbent, brought the hope of some calm in international relations while the likely retention of a Republican majority in the Senate should serve to act as a brake on any of the wilder left wing elements of the Democratic Party. The release of highly encouraging COVID-19 vaccine results then triggered a steep rally with an accompanying change in the tone of sector leadership within the markets away from big tech and pharma and back to the more cyclical areas.
We have not been overly active within the Fund’s portfolio but did add to three existing positions at the end of October as prices looked overly depressed: Roche Holding, RELX and Mastercard. Weighing on performance over the period were Essity, the Swedish personal care products company, their Q3 sales figures disappointed the market (it was mostly de-stocking); McDonalds also weakened overall, despite holding an analyst day on 9 November that reportedly went well, highlighting the opportunity in an expanded chicken offering along with their new McPlant burgers. The tech holdings also drifted as the NASDAQ appeared to run out of steam, Amazon, Ansys, Microsoft and Oracle all fell back, though Alphabet was a surprising good feature, up by 10% after the US election result.
On the positive side, the reinsurers leapt, SwissRe by more than 20%, closely followed by Everest Re and an 11% rise in Berkshire Hathaway. The latter produced their figures early in November, the main feature of which was a colossal increase in repurchases of their own stock, $16 billion worth over the first nine months of the year. Practically all the financial sectors were strong, notably the banks, Morgan Stanley rose 18% over the period. The Japanese holdings in the portfolio had a good month, Nidec Corp (manufacturer of miniature precision motors), rose 10% in a strong industrial sector, M3, Inc rose again (it has been an extraordinary year for this company), while Sony Corp jumped after good Q2 figures, they hope to sell more than 7.6 million PlayStation 5 units over the next few months – it has been reported that with the PlayStation 5 release in the UK this morning, Tesco, John Lewis and GAME websites have all crashed under the high demand.
Luxury had another good month with LVMH a positive feature again along with L’Oreal. Heineken (along with most of the drinks companies) heaved a sigh of relief on the vaccine news and jumped 18%, in contrast to the major ‘defensive’ food companies, Nestlé and Unilever, whose stock drifted off.