Nasdaq DW Global Momentum Q2 2021 commentary
|Asset classes||Global equities (including emerging markets, excluding US companies)|
|Investment style||: Systematic investing based on stocks’ relative strength|
|Quarterly return||7.2% (net of fees)|
|Annualised volatility (since inception)||23%|
Global markets continued higher during the second quarter, continuing the recovery from the global pandemic. Returns were strong across the board with all the major asset classes delivering positive returns. The performance of equity markets has been very choppy this year. The returns of the broad benchmarks have been very strong, but under the surface we have seen quite a bit of rotation. The first quarter was characterized by a large laggard rally where areas of the market that had not performed well for a long time suddenly did very well. This was driven largely by hopes of a strong recovery as vaccination rates increased and COVID became less of a threat to the economy. The second quarter was characterized by a pullback in these trends. That has led to choppy performance from most factor strategies – momentum included. This potential transition period is global and will take some time to sort itself out.
Part of the reason why markets have been so choppy is that it is so difficult to interpret data right now. We had artificially low numbers a year ago when the global economy was shut down due to the pandemic. As things return to normal, economic activity is snapping back.
Commodities have also had a stellar year adding to the inflation story. Again, many people are arguing the high prices are transitory given we are still yet to return to full capacity after the economic shutdown. There will be an immediate impact on consumers’ wallets though as businesses are passing along higher input and labor costs.
Portfolio performance (net of fees)
|Since inception (March 2006*)||311.8%|
Top 10 portfolio holdings (as of 30/06/21)
37.9 %of total portfolio
|ASML Holding N.V.||5.3|
|Himax Technologies, Inc.||3.5|
|Logitech International S.A.||3.4|
|Companhia Siderúrgica Nacional||2.9|
Best-performing positions (note performance shown for the quarter reflects the performance of the security during the part of the quarter we owned it, not necessarily the performance of the security itself for the full quarter)
- BioNTech SE (+105.04% Q2 2021) provides biotechnological solutions. The Company develops various types of treatments for cancer patients' tumors. BioNTech serves customers worldwide.
- Danaos Corporation (+56.06% Q2 2021) owns a fleet of containerships. The Company charters these vessels to liner companies.
- Himax Technologies, Inc. (+53.06% Q2 2021) designs and manufactures integrated circuits. The Company produces liquid crystal displays (LCD).
- Companhia Siderurgica Nacional S.A. (CSN) (+32.78% Q2 2021) manufactures iron and steel in Brazil. The Company operates mines, an integrated steel mill, service centres, ports, and railroads. CSN manufactures and distributes hot-rolled, cold-rolled, and galvanized steel products to the automobile, auto parts, civil construction, electrical equipment, and packaging.
- Embraer SA (+25.43% Q2 2021) manufactures and markets commercial, corporate, and defense aircraft. The Company also provides maintenance and repair services and markets spare parts for its jets. Embraer markets its aircraft to commercial airlines mainly in the United States and Europe and to governments in Europe and Latin America.
Worst-performing positions (note performance shown for the quarter reflects the performance of the security during the part of the quarter we owned it, not necessarily the performance of the security itself for the full quarter)
- Koninklijke Philips NV (-11.25% for Q2 2021) is a health technology company focused on improving people's health across the health continuum from healthy living and prevention, to diagnosis, treatment, and home care. The Company offers products and services in diagnostic imaging, image-guided therapy, patient monitoring and health informatics.
- Makemytrip Ltd. (-12.89% for Q2 2021) offers travel services over the Internet. The Company operates websites that allow travelers to research and plan trips and book airline tickets, hotels, packages, rail tickets, bus tickets, and rental cars. Makemytrip also offers access to travel insurance.
- 21Vianet Group, Inc. (-20.22% for Q2 2021) provides carrier-neutral Internet data center services. The Company hosts its customers' servers and networking equipment, as well as provides interconnectivity to enable customers to deliver data across the Internet. 21Vianet conducts business in Beijing, China.
- Vipshop Holdings Ltd. (-21.87% for Q2 2021) retails branded products at discount over the Internet. The Company retails through flash sales, in which limited quantities of an item are sold at deep discount for a specified period of time.
- Xunlei Ltd. (-24.06% for Q2 2021) offers Internet media services. The Company provides network download, video playback, digital content, online game, and other related services.
All the uncertainty and choppiness has resulted in the strategy having higher than normal turnover so far this year. It appears as if this will continue throughout the summer as well. The Nasdaq DW Global Momentum team’s methodology is designed to look for strength, and right now that strength has not been sustainable. The Nasdaq DW Global Momentum team has held up well considering the headwinds in the market. These periods of choppy action eventually resolve themselves one way or another and turn into trending markets. The strategy is designed to find and capitalize on those trends.