CB European Quality Fund Quarterly update 31 December 2014 - - PowerPoint PPT Presentation
CB European Quality Fund Quarterly update 31 December 2014 Morningstar Sweden and Dagens Industri: Best portfolio manager in 3-year 5-year 10-year the European equity category 2012 Fund performance* and AUM NAV, 31 December 2014 (EUR) EUR
Q4 2014 +4.5% YTD 2014
Fund inception 1995 (annualised) +7.5% AUM (million) 45.1.
*Sicav A 10-year 3-year 5-year
Morningstar Sweden and Dagens Industri: Best portfolio manager in the European equity category 2012
Sicav A 87.33 Sicav I 112.35 Acc. 205.34 Distr. 86.40 +8.3% +5.1% +7.7% 426.3.
EUR SEK
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Financial Supervisory Authority
administration is performed in Luxembourg
companies, launched in 1995
Carl Bernadotte
Portfolio manager & owner >25 years’ experience Born 1955
Marcus Grimfors
Portfolio manager 6 years’ experience Born 1981
Alexander Jansson
Portfolio manager & CEO 6 years’ experience Born 1983
Erik Allenius Somnell
Business development 3 years’ experience Born 1984
3 +4.7% +4.5%
+6.8%
Source: MSCI, CB Fonder
fourth quarter (for three consecutive months) – which was a trend reversal of the weak performance since the summer of 2012.
returned -1.5% for the full year 2014, in EUR.
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12.05 +0.43
+0.67 +1.25 49.17 8.63
14.47 +0.40
Standard deviation, % Sharpe (0%) Max drawdown, % Beta against MSCI Europe Alpha against MSCI Europe, % p.a. Consistency with MSCI Europe, % Tracking error, % Information ratio
The fund has – due to the strong risk-on rally in the market between the summer
underperformed against the benchmark, but still has a positive alpha due to the low beta (0,67). The fund’s risk- adjusted return, Sharpe, is higher than that for the index.
Source: MSCI, CB Fonder
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market as a whole. During the fourth quarter, CB European Quality Fund outperformed MSCI Europe Net with 4.7 percentage points. See graph below.
we had no exposure at all at the end of the quarter.
which should benefit these sectors, ceteris paribus. See current and historical exposure on page 10 and 19 respectively.
Source: MSCI, CB Fonder
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price drop as there are analysts; irrespective of which theory you subscribe to, you have to take demand into consideration.
particular; that affects the oil demand, hence the oil
deflation – a plausible scenario even before the oil price drop.
deflationary scenario in front of us – it is vital that our companies deliver stable growth, otherwise they fall out
EPS growth for today’s portfolio and ditto for index; in both cases, our companies have consistently higher growth than index – and indeed more stable growth.
rewarded – and that the market, the index, will not deliver that.
Source: MSCI, CB Fonder
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Source: MSCI, Bloomberg, CB Fonder
volatility.
five year horizon; when the green line is above, the fund has outperformed, and vice versa. The fund has mostly
(partly explained by risk-on rally the year after the crises).
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*Average value during Q4 2014.
Dignity Fresenius SE Shire Linde Capita Novo Nordisk +0.65 +0.65 +0.58
+27.9 +10.1
+1.4
2.2 6.6 2.7 1.3 2.6 4.2
historical growth rate of the company is sustainable going forward; during the period 2007-2013 the company delivered an EPS growth CAGR of 16% - and the company believes that it can maintain double-digit EPS growth in the medium term. The stock gained 27.9% during the quarter, in EUR.
the case in Q3, from a strongly appreciating USD vis-à-vis EUR. The group has a very attractive (and defensive) growth profile: estimated EPS growth of 17% and 14% for 2015 and 2016 respectively. The stock gained 10.1% during the quarter, in EUR.
.
quarter, which was dropped during the fourth quarter due to changed tax rules regarding tax inversion. We sold the stock during the third quarter and bought it back during the fourth quarter – after AbbVie had withdrawn the bid. The stock gained 22.5% during the remainder of the quarter, in EUR.
all companies within the Energy and Materials sectors negatively; both sectors that we at the end of the quarter had no exposure against. Linde gained 1.4% during the quarter, in EUR.
to another of our holdings, the French company Sodexo). The share lost 6.9% during the quarter, in EUR.
was in the fourth quarter the top detractor. In our opinion there is nothing new under the sun; the company is very well positioned in a steadily growing market: estimated sales and EPS growth is 11% and 16% respectively, characteristics hardly matched by any company as large as Novo. The share lost 7.7% during the quarter, in EUR.
Performance % Company Contr./Detr. %
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cap of at least €1 billion, which we on average are far above: €27.3 billion for the 10 largest holdings.
Active Share for the fund: 92%.
investment criteria, attractive valuation (compared to profit growth) is another.
Company Country Sector Market cap € bn Share of AUM Share of MSCI Europe EPS growth 2015E EPS growth 2016E PEG 2015 PEG 2016 Fresenius AG Germany Healthcare 23.0 6.9% 0.19% 17% 14% 1.1 1.1 Next UK Consumer Discr. 13.4 5.0% 0.20% 9% 8% 1.8 1.9 AAK Sweden Consumer Staples 1.8 4.7% 0.00% 16% 12% 1.1 1.3 Assa Abloy Sweden Industrials 16.0 4.6% 0.21% 15% 10% 1.4 1.8 Handelsbanken Sweden Financials 23.9 4.5% 0.29% 5% 5% 2.7 2.9 Sodexo France Consumer Discr. 12.1 4.5% 0.12% 18% 13% 1.2 1.4 Henkel Germany Consumer Staples 36.3 4.4% 0.38% 8% 8% 2.0 1.8 Kerry Ireland Consumer Staples 10.0 4.4% 0.14% 11% 12% 1.7 1.4 Novo Nordisk Denmark Healthcare 89.3 4.3% 1.05% 16% 17% 1.5 1.1 Reckitt Benckiser UK Consumer Staples 47.4 4.2% 0.64% 2% 5% 12.7 3.8 Total/Average 27.3 47.6% 3.2% 12% 10% 2.7 1.9
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No exposure to ”big oil/gas”
11 18.6% 14.2% +0.71
*36 months data on a 60-day rolling basis (EUR)
The fund’s standard deviation is consistently lower/in line with that of the benchmark, MSCI Europe. This becomes particularly evident when the risk in the market is rising, as has happened in the last quarter. The fund’s beta is consistently below 1
40 60 80 100 120 MSCI Europe Net
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1 2 3 4 5
Source: MSCI, CB Fonder
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2012, which in our view was driven by the declining risk aversion (Draghi’s “whatever it takes”-speech) and an
The positive trend for Value has, however, flattened and turned in the opposite direction, driven by increased concerns for low growth and even deflation.
correlation to Growth (0.81) and thus a relatively low correlation to Value (0.53). See appendix.
Source: MSCI, CB Fonder
during the past five years. However, the underperformance came during the year after the financial crisis (partly explained by the strong appreciation of the Swedish Krona); Europe has actually outperformed Sweden during the past four years.
market – which also holds true for the past years. Europe, on the other hand, has in recent years been criticized for being a weak market, but has nevertheless
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Note! Data is relative MSCI AC World; Source: IBES, DataStream, DB
2004-2007 bull market.
however, been driven by hopes and not fundamentals: the earnings revision ratio has consistently been negative, i.e. the market has been driven by multiple expansion. Going forward, we believe that EPS growth ≈ market return.
estimates momentum than the MSCI AC World index. That means that the earnings estimates in Europe are revised downwards at a lower rate than that for the average of the other regions in the global index, which is usually a positive for relative performance.
Note! Data is relative MSCI AC World; Source: IBES, DataStream, DB
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In the rear mirror – what has happened? In the crystal ball – what’s next?
continue to deliver stable growth – otherwise they fall out of the portfolio. The estimated sales and earnings growth for our portfolio for 2015 are 7% and 11% respectively, compared to 2% and 11% for MSCI Europe. However, one should remember that since 2011 the estimated earnings growth for the index has been consistently too high; the earnings growth has not been higher than 3% in any single year and negative for two consecutive years. During the same period, today’s portfolio has shown an impressive earnings growth
and gas companies. We are overweight Consumer Discretionary and Consumer Staples; a lower oil price means higher disposable incomes, which should benefit these sectors, ceteris paribus.
deflationary environment. Our view is that the market, i.e. the index, will not deliver stable growth.
period July 2012 – September 2014. This failure can partly be explained by the sharply falling risk aversion and the consistently rising market; the MSCI Europe Net index posted positive returns eight out of nine quarters.
it the first out of seven quarters in which the fund outperformed – and a trend reversal. This was partly driven by increased concerns for low growth and even outright deflation.
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17
18
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No exposure to the energy sector (oil/gas companies)
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With a relatively low correlation compared to its benchmark index, MSCI Europe, as well as other important indices, the fund will add diversification to most
correlation with MSCI Europe Growth.
*Monthly data from MSCI for the period 31 December 2009 – 31 December 2014 (EUR)
EQF Europe World BRIC EQF 1.00 0.69 0.69 0.50 Europe 1.00 0.80 0.59 World 1.00 0.64 BRIC 1.00 EQF Europe Europe Value Europe Growth EQF 1.00 0.69 0.53 0.81 Europe 1.00 0.97 0.95 Europe Value 1.00 0.84 Europe Growth 1.00 EQF Europe Europe Large Cap Europe Mid Cap Europe Small Cap EQF 1.00 0.69 0.67 0.75 0.72 Europe 1.00 1.00 0.96 0.88 Europe large cap 1.00 0.94 0.85 Europe mid cap 1.00 0.95 Europe small cap 1.00