Focus on what you can control

There have only been six occasions since the index launched when the S&P 500 has fallen by 7.5% in one month and regained at least the same amount the month after.

by James Godrich

Fund Manager

July 2022 was one of them. Many column inches will be filled with reasons for the dramatic rebound, which we don’t intend to add to.

We see little value that we can add in either commenting about or trading based on volatile swings in certain macroeconomic indicators, central bank rhetoric or investor sentiment – they are out of our control and unpredictable. We believe that what is in our control and is more predictable is owning great businesses bought at reasonable prices and remaining a supportive owner for long periods of time.

It is one year since we reminded ourselves in this commentary that, “we tend to invest in these businesses because we think that they will now, or in the future, generate more profits and cash than they can productively reinvest. At that point, we expect those businesses to return some of those profits and cash to shareholders in the form of a dividend. That is our reward as loyal investors and can be either paid out to unit holders in cash or it can be reinvested to increase the number of shares held across other businesses in the fund.”

In that commentary, we looked at the combined dividend return of three businesses held within the funds. We continue to hold all three and are pleased to report further progress on revenue, earnings and ultimately dividends across these. In July, RELX reported revenue growth of 13%, earnings up 14% and the half-year dividend up 10%. Diageo announced sales up 21%, earnings up 29% and the dividend up 5%. And Games Workshop were able to deliver revenue growth of 12%, earnings per share up 5% and maintained the dividend at the same level.

In volatile markets we are finding a number opportunities to add to both new and existing holdings. We hope to be able to report further progress in their revenue, earnings and dividends next year and, hopefully, for many years to come. We believe it will be the success of these metrics (amongst others) that will be key in driving the total shareholder return of the businesses held, and ultimately of the fund over the long term.

James Godrich

James is the Fund Manager of the Coleman Street Investment Funds

The value of securities and their income can fall as well as rise. Past performance should not be seen as an indication of future results. All views expressed are those of the author and should not be considered a recommendation or solicitation to buy or sell any products or securities.

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