Global StockPicker Q3 2017 Commentary

Instruments traded:Single Stock CFDs
Asset Classes:Global Equities
Investment Style:Fundamental Analysis, Dynamic Risk Allocation
Quarterly Return:8.92% (net of fees)
Q3 2017 daily return volatility:1.16%

Market Overview

Equity markets rose 1.1% in EUR (as per the benchmark MSCI World ex EM) during the third quarter of 2017, resulting in a year-to-date return of 3.5%. The third quarter market development was led by a benign global economic growth environment and robust corporate earnings. However, these positive fundamentals where diluted during the quarter, subsequent to the depreciating value of USD for future European corporate earnings. At the same time geo-political issues concerning the North Korean situation resurfaced as a risk factor.

Portfolio Performance

 July6.9% 
 Aug-3.8% 
 Sept5.9% 

The Global Stockpicker CFD portfolio had a return of 8.9% for the third quarter outperforming the benchmark by 7.8%. For 2017 YTD the return of the portfolio is 12.8% after deducting costs and outperforming the benchmark return of 3.5%.

  • The average leverage ratio during the third quarter was x1.88 commitment, contributing most to the portfolio return
  • Portfolio return (excluding leverage) was 1% better than market return
  • CFD costs detracted approximately 1%

Best performing positions

  • Tractor Supply is a US retail chain catering to leisure farmers and rural life style. Its stock price rose by 16.7% as equity market fears over potential competition from online retailers especially Amazon subsided. Tractor Supply costumers are not typical Amazon customers due largely to different life style.
  • Ally Financial provides automotive financial services mostly lending. The position responded positively by 16.1% to declining concerns about falling used car prices earlier in the year and a positive reaction to a better than expected earnings announcement. The stock is valued below book value, which we find attractive given an improving outlook for earnings.
  • Facebook rose by 13.2% as the leading social media company is improving on its ability to monetize traffic by adding video content. By this the company can raise pricing for advertisers.
  • DNB is the leading Norwegian Bank. The position rose by 13% as the company raised its outlook for earnings due to declining provisions as the energy related exposures are performing better than expected.

Worst Performing positions

  • General Electric is a US industrial conglomerate. The company has spent the last years on refocusing on their core capital goods competences with in jet engines, gas turbines and trains. In this process their exposure to financial services through GE Capital has been disposed. However, the position fell 10.5% as the equity market is questioning their earnings target and hence dividend capacity due to cash flow short falls compared to accounting earnings. We think the concern is misplaced.

Outlook

In the fourth quarter of 2017, the strategy manager for Global StockPicker expects equity markets to behave in a consolidating modus until there is more clarity on central bank bond tapering and interest rate normalization priorities. However, any market setback is expected to be short lived due to the lack of attractive alternative, liquid investments.

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