The value of your investments can go down as well as up. Losses can exceed deposits on margin products. Please ensure you understand the risks.

The value of your investments can go down as well as up. Losses can exceed deposits on margin products. Please ensure you understand the risks.

{{ "2017-07-13 10:30:00Z" | moment:{inputFormat: 'YYYY-MM-DD HH:mm:ssZ'} }}

Global StockPicker Q2 2017 Commentary

Instruments traded:Single Stock CFDs
Asset Classes:Global Equities
Investment Style:Fundamental Analysis, Dynamic Risk Allocation
Quarterly Return:-4.35% (net of fees)
Q1 2017 daily return volatility:1.07% 

Market Overview

Equity markets fell -2.45% in EUR (as per the benchmark MSCI World ex EM) during the second quarter (Q2) of 2017, resulting in a positive year-to-date return of 2.3%. Q2 market development was led by disappointing political execution from the newly elected US president, Donald Trump. This follows after the equity market embedded (part of) the benefits of his election program during the latter part of 2016 and early part of 2017. The value of the US Dollar fell -6.5% against the EUR as a consequence. At the same time, political disintegration risk fell substantially in Europe on the back of the election outcome in France.

Portfolio Performance

Having ended the last quarter at a high point, the Global StockPicker portfolio started Q2 with a slight downturn. Despite recovering performance several times, the significant market movement at June-end meant the portfolio ended the quarter down -4.35%, underperforming the benchmark by 1.65%. For the first half of 2017 the return of the portfolio is up 3.6%, outperforming the benchmark return of 2.3% after deducting costs:

  • The average leverage ratio during the second quarter was x1.7 commitment, contributing most to the negative portfolio return, given the declining market development.
  • Portfolio return (excluding leverage) was equal to market return
  • CFD costs detracted approximately -1%

Best performing positions

  • Novo Nordisk is a Danish pharmaceuticals company mainly specialising in products for the treatment of diabetes. Its stock price rose 16.4% as market fears for pricing pressure on their core insulin products, subsided. The stock also benefited from the release of better than expected performance data for the new long acting insulins, where the strategy manager is expecting their future growth to come from.
  • Nokia, the Finnish mobile network provider, rose 9.8% as the equity market has started to build expectations for deployment of 5G cellular networks. The company also positively settled their patent litigation issues with Apple.
  • Oracle, US listed, benefitted from database services moving to the cloud. This is despite some news that the equity market has doubts over Oracle’s ability to capitalise on this trend. During the quarter the position rose by an additional 12.9% in US Dollar terms, having already risen by 16.8% during the first quarter.

Worst Performing positions

  • Pandora is a Danish listed producer of affordable luxury jewellery. Its stock price fell -21.3%, as five hedge funds took record-level short positions against the company. These short positions were added due to a lack of belief in the longevity of the life-cycle for Pandora’s main product (charms for bracelets), and that the company will soon face rapidly declining growth rates, including an imminent profit warning for 2017. The strategy manager does not subscribe to this negative view and has raised the weight of the position in the portfolio.
  • Petroleum Geo-Services is a Norwegian listed provider of off-shore seismic services. Whilst it would benefit from the oil price returning to USD 60-70 a barrel, it fell by -36% as the equity market questions OPECs ability to balance the oil market with production cuts.
  • Akamai Technologies is a US listed provider of internet routing optimisation and security services. It fell by -16.5% as it announced it will enhance its position by making acquisitions.

Outlook

In the third quarter of 2017, the strategy manager for Global StockPicker expects equity markets to incur a period of consolidation 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. Setbacks may be initiated by political issues from either lack of progress on President Trump’s agenda, or central bank announcements on greater than expected urgency in normalizing monetary policies in the developed world. Indeed, the market’s expectation for Trump to deliver has already substantially deteriorated.