Saxo Morningstar USD Moat portfolio Q4 2019 commentary

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Saxo Group

Instruments traded
Asset classesGlobal equities (excluding emerging markets)
Investment styleFundamental analysis focused on quality and value
Quarterly return+14% (net of fees)
Annualised volatility (since inception)14%

Market overview

Q4 2019 saw a strong performance for global stock markets, supported by accommodative central bank policies and the economy proving more resilient than many expected in the second half of the year. Trade fears reduced and more clarity surrounding Brexit helped shares to record highs in many parts of the world.

Although equity sectors gained ground, the energy sector was relatively weak as concerns around oil oversupply tempered gains, whilst healthcare took some heat amid political developments. Booming technology stocks and internet-oriented names in the communications services sector underpinned the outperformance of “growth” stocks (companies whose earnings are expected to grow substantially and thus are more expensive than the average stock) over “value” stocks (stocks that are priced cheaper than the average stock) throughout 2019.

Regarding bonds, the US Federal Reserve’s policy reversal to become (once again) accommodating and lower rates, fostered strong returns across fixed income markets for most of the year. Central bank easing, low defaults and manageable inflation expectations supported bond investors. Even risky high yield bonds and emerging market debt delivered double digit gains.

Inception (31.05.2016)+33%

(Performance is net of all fees)

Best performing positions

  • Tata Motors Ltd operates in the Consumer Cyclical industry. It owns iconic brands such as Jaguar and Land Rover (JLR), while offering a broad product line of other motor vehicles. Last quarter it surged with Strong sales from Jaguar Land Rover in China and company-wide cost reduction measures have enabled Tata Motors to bounce back from a poor second and third quarter. Tata is trading at approximately $20 under Morningstar’s fair value price of $33. 

  • Line Corp is the leading mobile messaging app in Japan, Taiwan, Indonesia and Thailand. This quarter saw Line’s share price increase with the integration of Yahoo Japan’s Rich Resources and Line’s extensive user base generating profitable synergies for the company. The final integration is expected to be finished by October 2020. 

  • Anixter International Inc Anixter International Inc is a leading distributor of network, security, electrical and utility power products and services. Its share price increased thanks, in part, to speculation on two buy-out offers: one from Wesco and the other from Clayton, Dubilier and Rice. Wesco offered to acquire Anixter International for $97 per share and Clayton, Dubilier and Rice have raised their initial offer to $93.56. Morningstar believe the stock is trading at a discount and will be worth keeping in the portfolio next quarter.  

Worst performing positions

  • Cameco Corp is one of the world’s largest uranium producers. Q4 saw the stock price drop. A drop in uranium prices as well as contracting activity being impinged by global issues such as US, Canada and China trade tensions negatively affected Cameco’s share price. On more positive news, Cameco raised full year sales figures slightly from $1.77 to $1.92 billion. Morningstar sees the share as being significantly undervalued. Their fair value price is set at CAD $21 compared to its current price of CAD $11.60 per share.

  • Adient Plc is an Irish-domiciled manufacturer producing seating for automotive vehicles worldwide. The company accounts for one-third of the automotive seating markets revenue globally. This quarter, Adient’s share price dropped due to major restructuring initiatives which have reduced its cash flow. Morningstar believes investors must be patient with this stock and look at the long-term view. The current share price of $22 per share is well below Morningstar’s fair value price of $51 per share, and the company has three sustainable competitive advantages: intangible assets, switching costs and cost advantage.

  • Macerich Co is an S&P 500 company that invests in premium mall assets. Its stock price dropped due to worse-than-expected occupancy rates and higher-than-expected store closures across their portfolio. Occupancy declined 0.3% to 93.8%, which is down from 95.1% in Q3 2018. The share price currently trades at $25, far below Morningstar’s fair value price of $56 per share. 


Regardless of how we got here, it is hard to look past the evidence linking expensive valuations to lower future returns. As such, we must be mindful of behavioural biases that paint these recent returns as reasonable and sustainable expectations for the future. With this in mind, Morningstar Investment Management continues to focus on delivering the maximum amount of return, for a given level of risk, as opposed to just generating returns without regard for the risk taken in achieving them. Ultimately, the portfolio’s process looks to identify unloved assets that we think will help deliver positive investor outcomes over the longer term.  


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