The Church House UK Equity Growth Fund celebrates its 20th birthday this month. CHUK, as we know the Fund, was the first fund that we launched and we are quietly proud to report that it has so far done exactly what it says on the tin.
CHUK has been the mainstay of all our private client portfolios (and our own personal accounts and pensions) since 2000, providing capital growth through investing in what we believe are the highest quality businesses listed in London.
We thought that we would use this birthday as a chance to indulge in a brief moment of nostalgia and then to have some fun looking into the future. CHUK was launched on 6th July, 2000 when Bill Clinton and Tony Blair led the free world, Eminem topped the charts with The Real Slim Shady and the stock market tech bubble was bursting. CHUK began life investing in 50 UK businesses. Unilever was one of our first investments for CHUK and, we a happy to say, remains a top holding to this day. Since July 2000, Unilever has delivered a total return to shareholders of 825%, compared to 89% for the FTSE 100. Over two decades the business has doubled its operating profit, more than quadrupled earning per share and its dividend has compounded at an annual rate of +12% per annum. In 20 years, some brands have come and gone, but, reading through the Unilever annual report for 2000, names such as Dove, Hellmann’s and Ben & Jerry’s have been stalwarts throughout. Unilever has expanded far beyond their European roots, with revenue outside of Europe expanding from 46% in 2000 to 78% in 2019. Most notably, Unilever now make 60% of their revenue from emerging markets, where demand for their branded consumer goods has been fuelled by high population growth and wealth spreading to new newly-moneyed middle classes. 2020 will undoubtedly be a tough year for Unilever, as COVID-19 has ripped across the globe and consumers are, of course, feeling the pinch. Nonetheless, we are confident that the core strengths of Unilever, its global brands, distribution and capacity to innovate remain and consider that the business has many more years of growth ahead of it.
Switching from an old friend of CHUK to a newer investment that we believe will be a mainstay of the Fund for the next twenty years… Croda International. Before getting into Croda, we wish to reiterate that we are firm believers that “the ideal holding period is forever”, as Mr Buffett taught us – every new investment that we make we intend to hold for the long term. We are all human and make mistakes and it is these investments that we sell, but if we are correct in our original investment decisions, then then best thing that we can do is to hang on and, if we have spare cash, keep adding to these shareholdings when opportunities arise.
Now, back to Croda. Their roots are in early 20th century Yorkshire, when a Mr Crowe and Mr Dawe (hence Cro-Da) established a sheep farm with the aim of developing an effective process to extract lanolin from sheep’s wool. Lanolin is worth a Google for anyone new to it. It is fair to say that lanolin is a true gift from nature and has been proven, amongst other things, to be a wonderful anti-ageing agent. Fast forward to 2020 and Croda is a world leader in premium natural chemicals sold into industries, such as cosmetics and healthcare. Croda is the trusted partner, for example, to L'Oréal for the active ingredients in their skin care products (still based on lanolin) and AstraZeneca for their pure grade excipients used to deliver vaccines. Croda’s current CEO (himself a proud Yorkshireman), Steve Foots, once told us that ‘the key to Croda is their culture of innovation’. This may sound like corporate speak, but when you appreciate that Foots joined Croda as a chemistry graduate in 1990 and worked his way up through the business before becoming CEO in 2012, you see that Croda really does run in his DNA. We see Croda as an innovative British business that has a loyal list of quality customers across the world. We expect that Croda will continue to expand for many years to come, all founded on this core of innovation and excellent customer relationships. You can call us in 20 years to check how the investment worked out for CHUK.
We would like to thank all of those clients that have supported us through the years and are excited at the prospect of the next 20 years for CHUK…