This month’s performer: Garmin
Global equities had another positive month in August, the seventh in a row. Non-cyclical companies performed well during the first weeks of the month as long-term market interest rates began to rise.
However, this pattern was broken after comments from the Fed that played down the risks of aggressive shrinkage in its support purchases, which then instead drove technology and cyclical stocks during the final phase of the month. In the end, it was a more or less ordinary month with technology companies, cyclical shares and growth on top.
The best returning sectors in the portfolio were consumer durables and finance, while the weakest was groceries. The best-returning companies were Garmin (+11.0%), Vestas Wind Systems (+10.0%) and Novo Nordisk (+8.8%).
Garmin reported strong quarterly figures at the end of last month and continued a positive trend without any major news coming out in August.
Vestas was also not driven by any company-specific news, but rather by fiscal policy and expectations of massive infrastructure investments aimed at renewable energy.
Novo Nordisk, on the other hand, presented quarterly figures at the beginning of the month that beat already relatively high expectations. It showed higher growth than expected, driven by strong development in products focused on the treatment of obesity, while at the same time seeing strong demand for Wegovy, a new product for weight loss that was launched at the end of the quarter. As a consequence, management significantly increased its estimates of both revenue and profits for the full year.
From a valuation perspective, the portfolio continues to trade without a premium valuation against the stock market, despite stronger key figures for growth, profitability and risk. The fund’s focus on safe and stable quality companies to own long-term has since its inception delivered significantly better risk-adjusted returns than global equity indices, mainly by overdelivering in weak markets.
We remain convinced that there is good value growth to be gained from current levels and that, over a stock market cycle, the fund contributes with both risk reduction and excess returns relative to other broad global funds.