Picking a complementary team

Inflation, interest rates and unemployment have taken a back seat amongst many media outlets in November, as the Football World Cup, amongst some controversy, has gotten underway.

by James Godrich

Fund Manager

Markets continued to surprise much of the investment community to the upside though with another month of strong performance, with particularly impressive returns from retailers and commodity producers – hardly what one would expect given the much-discussed recessionary concerns.

In the same way that the winning football team in Qatar will have a squad that performs well at different times and complements one another on the pitch, so too must a successful portfolio. As an example, two businesses held within the CSI portfolio have had diverging fortunes between 2021 and 2022 – but together have provided a smoothed outperformance over the combined period.

Burberry – a globally recognised luxury brand and retail business – saw a share price return of 1.6% in 2021, whilst RELX – a high quality information and analytics business, seen by some investors as recession-proof - returned 34.0% versus the FTSE All Share which returned 14.6%. In 2022, however, to the 30th November, RELX shares have fallen by 3.7% whilst Burberry shares have risen a remarkable 19.8%, against the FTSE All Share index falling by 1.6%. When considering the cumulative performance over the 23 months discussed (January 2021 to November 2022), both shares have outperformed the FTSE All Share.

It remains our aspiration to hold a collection of high quality assets trading at reasonable prices whose performance will complement, and not be necessarily correlated with, one another. We will continue to tilt the portfolio towards assets in which we see value and reduce our exposure to those who appear less attractive; at present we see further opportunity in areas of the market that will perform well should the macro backdrop continue to positively surprise and march over what appear to us to be quite low expectations.

James Godrich, Fund Manager

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. At times, the firm or employees of the firm may have positions in securities discussed.  Should any conflict of interest arise, these are managed under conflicts of interest policy, a copy of which is available on request.  

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