This period has seen international stock markets continuing in the cheerful vein established after the US Presidential Election and successful COVID-19 vaccine results.
US stocks rose around 4% (S&P 500), as did Japanese, the UK and European markets were all up, but by more modest amounts. The NASDAQ was back leading the US markets again with a gain of around 7%, though there was a noticeable sectoral shift here as many of the big tech names trod water while other sectors picked-up. Tesla continued its extraordinary run (up a further 28% over this period) prior to joining the S&P 500 Index on 21 December where, at current market capitalisation, it would be the sixth largest company.
The Esk Global Equity Fund portfolio under-performed over this period, principally because we don’t hold any of the oil majors or tobacco companies, both of which sectors staged strong recoveries: Exxon Mobil Corp rose 17% and Philip Morris by 11% (Marlboro is still the no. 1 global brand). Not owning Tesla didn’t help either. Despite the better performance from the tobacco companies, the consumer staple companies were generally laggards, amongst the Fund’s holdings, Nestlé and Unilever both weakened again.
The pharmaceutical sectors provided some sharp contrasts. AstraZeneca fell around 8% following their bid for Alexion Pharmaceuticals, which leapt 30%, while Sanofi fell by almost 9% as their vaccine results disappointed (a joint venture with GlaxoSmithkline). In the Fund’s holdings, we benefitted from a 20% gain in Illumina and similar gain for M3 Inc, but Gilead Sciences drifted and Lonza Group fell around 5%.
The technology holdings in the portfolio had a good month, notably Ansys, Oracle and Verisign, which benefitted from a fresh recommendation from JP Morgan, to quote their analysis: “Being the registry operator for .com, the largest TLD on the internet, is a very lucrative position. VeriSign is one of the most lucrative unit economic franchises in our coverage given its exclusive position for .com registry operations, and it has the highest operating margins in our coverage.” Rather at the opposite end of the sector spectrum, our mining and materials holdings were buoyed by a strong month for Shin-Etsu Chemicals and for Rio Tinto, who have now parted company with their CEO, Jean-Sebastien Jacques, still mired in the disastrous destruction of the Juukan Gorge Aboriginal caves.
Sterling has risen again in anticipation of a last-minute Brexit deal, which weighs on the price of units in the Fund, though the US dollar has resumed its slide against most of the major currencies. The US Dollar Index (the DXY) is now back down to the lows of early 2018.