Nasdaq DW Global Momentum Q4 2020 commentary
|Asset classes||Global equities (including emerging markets, excluding US companies)|
|Investment style||Systematic investing based on stocks’ relative strength|
|Quarterly return||10.3% (net of fees)|
|Annualised volatility (since inception)||21.5%|
Since the global market recovery in the Spring of 2020, investors have been betting that we will beat the coronavirus and the global economy will return to normal. The distribution of the long-awaited vaccine has helped bolster investor confidence in an economic recovery.
Markets are forward-looking and have shrugged off record numbers of cases and hospitalizations in the hopes the economy will be robust in the later part of the year. The portfolio continues to be allocated to securities that the investment management team (the “team”) believes display favorable relative strength characteristics. The portfolio composition continues to be notably different in geographic allocation compared to the benchmark, thanks to the selective nature of the investment process. As of the end of the quarter, approximately 58% of the portfolio was allocated to developed markets and about 42% allocated to emerging markets.
The buy/sell process of the strategy starts with a look at the strongest sectors within the universe, overweighting strength and underweighting or eliminating relative weakness. The portfolio has continually had an underweight to financials relative to the benchmark over the past several years and this year the trend continued, with the portfolio allocating under 5% to the sector at the end of the year and averaging just over 1% for the past 12 months. Largely sector returns were positive, with Industrials being the largest outlier and the largest drag on performance for the year. While Consumer Discretionary and Technology powered the positive returns for the year.
Portfolio performance (net of fees)
|Since inception (March 2006*)||274.6%|
Top 10 portfolio holdings (as of 31/12/20)
43.5 %of total portfolio
|Nice Ltd Sponsored ADR||7.03|
|Argenx SE ADR||5.27|
|Gold Fields Limited||4.20|
|ASML Holding NV ADR||4.14|
|TAL Education Group||3.67|
|LVMH Moet Hennessy Vuitton||3.56|
|Sibanye Stillwater Ltd.||3.43|
|New Oriental Education & Technology||3.29|
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)
- Vipshop Holdings Limited (+79.93%) operates as an online discount retailer for various brands in the People's Republic of China. The company offers its branded products through its vip.com and vipshop.com online platforms, as well as through its internet website and cellular phone application. Additionally, it offers warehousing, logistics, product procurement, research and development, technology development, and consulting services. The company was founded in 2008 and is headquartered in Guangzhou, the People's Republic of China.
- MercadoLibre, Inc. (+54.8%) operates online commerce platforms in Latin America. The company also provides MercadoShops, a software-as-a-service hosted online store solution that enables users to set-up, manage, and promote their own Webstores. The company was founded in 1999 and is headquartered in Buenos Aires, Argentina.
- 21Vianet Group, Inc. (+49.78) provides carrier and cloud-neutral Internet data center services to Internet companies, government entities, blue-chip enterprises, and small-to mid-sized enterprises in the People's Republic of China. 21Vianet Group, Inc. was founded in 1999 and is headquartered in Beijing, the People's Republic of China.
- Sibanye Stillwater Limited (+42.64%) operates as a precious metals mining company in South Africa, the United States, Zimbabwe, Canada, and Argentina. Sibanye Gold Limited was incorporated in 2002 and is headquartered in Weltevreden Park, South Africa.
- NICE Ltd. (+24.89%) provides enterprise software solutions worldwide. The company operates in two segments, Customer Engagement, and Financial Crime and Compliance. It offers CXone, a cloud native open platform that supports contact centers ranging from small single sites to distributed remote agents and enterprises; and a digital-first omnichannel customer engagement platform that supports various digital and self-service channels, which allows organizations to add and integrate new and emerging channels. The company was formerly known as NICE-Systems Ltd. and changed its name to NICE Ltd. in June 2016. NICE Ltd. was founded in 1986 and is based in Ra'anana, Israel.
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)
- Adaptimmune Therapeutics plc, (-38.47%) a clinical-stage biopharmaceutical company, focuses on providing novel cell therapies primarily to patients with solid tumors in the United States. Adaptimmune Therapeutics plc was founded in 2008 and is headquartered in Abingdon, the United Kingdom.
- Gold Fields Limited (-24.57%) operates as a gold producer with reserves and resources in Chile, South Africa, Ghana, Australia, and Peru. Gold Fields Limited was founded in 1887 and is based in Sandton, South Africa.
- SAP SE (-23.46%) operates as an enterprise application software, and analytics and business intelligence company worldwide. SAP SE was founded in 1972 and is headquartered in Walldorf, Germany.
- JinkoSolar Holding Co., Ltd., (-14.51%) 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.
- AngloGold Ashanti Limited (-13.80%) operates as a gold mining company. AngloGold Ashanti Limited was incorporated in 1944 and is headquartered in Johannesburg, South Africa.
It has been a challenging year dealing with the global pandemic, but investment returns have been solid – especially momentum. The spread of COVID has caused a great deal of uncertainty, but some of that uncertainty seems to be dissipating with the distribution of the vaccines. The investment management team’s process is not designed to guess what is going to happen. The team will wait for any trends to develop and position the portfolios accordingly. However, the team expects a more robust economy in 2021.