Nasdaq DW Global Momentum Q1 2021 commentary
|Asset classes||Global equities (including emerging markets, excluding US companies)|
|Investment style||Systematic investing based on stocks’ relative strength|
|Quarterly return||2.58% (net of fees)|
|Annualised volatility (since inception)||23%|
Global equity markets generally continued their march higher in the first quarter of 2021. The MSCI EAFE Index finished Q1 up 3.99% and the S&P 500 Total Return Index finished the quarter up 6.18%. Commodities also did well on the strength of oil. The S&P GSCI Commodity Index was one of the top performing assets in our broad asset class matrix finishing up 13.55% for the quarter.
We seem to be in a period of transition -driven in large part by the ongoing reopening of global economies as we see encouraging developments in the fight against this global pandemic. Sectors of the economy that thrived over the past year and sectors that struggled are finding that their prospects are changing and the investment management team (the “investment team” or the “team”) is seeing that reflected in changes in the financial markets and in the portfolio. Turnover has tended to be relatively higher in recent months as the investment team has adapted to these changes. The team believes that periods of transitions may lead to favourable investment opportunities in the months and years ahead. Over the course of the quarter the team increased its exposure to sectors like Basic Materials, Consumer Cyclicals, and Industrials, while it reduced the exposure to Healthcare and Utilities.
The team believes that various market indicators are strong. Those indicators that have rolled over are still at high levels where the team is not too concerned about market weakness yet. Momentum underperformed some in the first quarter as the laggard rally allowed some areas to play catch-up. But the investment team is seeing that laggard rally losing some steam as some of the old laggards become leaders and make their way into the model. This is a very good sign, and the team is optimistic about the markets heading into the middle of 2021.
Portfolio performance (net of fees)
|Since inception (March 2006*)||284.2%|
Top 10 portfolio holdings (as of 31/03/21)
40.4 %of total portfolio
|Argenx SE ADR||5.39|
|Nice Ltd Sponsored ADR||5.36|
|ASML Holding NV ADR||5.22|
|Sibanye Stillwater Ltd. ADR||4.12|
|LVMH Moet Hennessy Vuitton||3.65|
|Logitech International Reg||3.11|
|Ternium SA Sponsored ADR||2.95|
|21Vianet Group Inc ADR||2.92|
Best-performing positions (note performance shown for position 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)
- Cemex SAB de CV (+34.82% Q1 2021) is a building products company. The Company produces, distributes, and markets cement, ready-mix concrete, aggregates, and related building materials.
- Ternium S.A. (+32.15% Q1 2021) operates as a flat and long steel producer. The Company offers a broad range of steel products for customers active in industries such as automotive, home appliances, HVAC, and construction through their manufacturing facilities, service center and distribution network. Ternium serves customers worldwide.
- NXP Semiconductors NV (+27.01% Q1 2021) operates as a global semiconductor company. The Company designs semiconductors and software for mobile communications, consumer electronics, security applications, in-car entertainment, and networking. NXP offers its products to the automotive, identification, wireless infrastructure, lighting, mobile, and computing.
- ASML Holding N.V. (+26.58% Q1 2021) develops, produces, and markets semiconductor manufacturing equipment, specifically machines for the production of chips through lithography. The Company services clients worldwide.
Worst-performing positions (note performance shown for position 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)
- JinkoSolar Holding Co., Ltd., (-32.62% for Q1 2021) together with its subsidiaries, engages in the design, development, production, and marketing of photovoltaic products. JinkoSolar Holding Co., Ltd. was founded in 2006 and is based in Shangrao, the People's Republic of China.
- New Oriental Education & Technology Group, Inc. (-24.65% for Q1 2021) offers educational services. The Company offers foreign language training, test preparation courses for admissions and assessment tests in the United States, the PRC and Commonwealth countries, primary and secondary school education, and other services. New Oriental Education & Technology Group also operates software development.
- NICE Ltd (-23.13% for Q1 2021) provides solutions that manage and analyze multimedia content and transactional data, such as telephony, web, radio and video communications. The Company's solutions include integrated, multimedia recording platforms, software applications and related professional services.
- Genmab A/S (-18.81% for Q1 2021) operates as a biotechnology company. The Company specializes in development of antibody therapeutics for the treatment of cancer. Genmab serves customers worldwide.
- Vestas Wind Systems A/S (-16.64% for Q1 2021) develops, manufactures, and markets wind turbines that generate electricity. The Company installs and maintenance turbines. Vestas Wind Systems serves customers worldwide.
The rest of 2021’s returns will most likely be driven by the success of the current vaccine rollout combined with the reopening economy. The investment team expects to see some large economic gains in the coming months, but they will be coming from artificially depressed numbers due to the lockdown last year. The vaccine rollout continues to be going relatively well in many parts of the world. There is enough good news to keep markets strong if there are no major roadblocks in the coming months.