Much of what has been written in the financial press over the last few months has focussed mostly on three broad topics; Coronavirus and the spread of the Indian variant, macroeconomics and the potential return of inflation and investment style and the value versus growth debate.
Without much more to add to any of these topics and given our emphasis on generating long term returns through stock selection, we thought now might be an opportunity to provide an update on some of the best and worst performing direct holdings in the funds as well as one new holding purchased over the month.
Two retail businesses in Burberry and Games Workshop were amongst the top performers in the funds over the month. Both offer premium retail products where demand has been supported by a loyal consumer base throughout the pandemic. Strong balance sheets and exciting reopening prospects have been able to support a resumption of dividends to shareholders in both instances and it appears the stock market is warming up to opportunities that may still lay ahead.
At the other end of the scale was Renishaw who was amongst the worst performers over the month as a result of rumours that there had been little buyer interest given the high price tag set by the market and the management demands on levels of R&D and location of jobs set by the two combined 53% octogenarian owners. Following news in March that the Board were putting the business up for sale we chose to reduce our holding by half. We felt that a lot was being asked of any potential buyer but also were aware that the rarity value in such a special business coming to market and available for sale in full was difficult to quantify – in hindsight perhaps we should have sold more.
Elsewhere in the portfolio, we have continued to find exciting new homes for capital and in May we initiated a new position in Etsy. Etsy is a two-sided platform that aims to bring together creative sellers and what they describe as ‘thoughtful consumers’ on a marketplace focussed on unique goods. Where dominant platforms exist, the barriers to entry are very high and financial returns are extremely attractive – buyers go where sellers are and sellers go where buyers are and every additional transaction both strengthens the network and comes at very little additional cost to the business. We think Etsy has the potential to offer an exceptional marketplace in a growing segment and enjoy the financial returns that come with this. The question for Etsy, however, is whether it can drive more frequent visits to its website and become ‘the’ name that comes to mind with their consumers.