Markets rallied relatively sharply during April, as investors began to look beyond the current period of lock-downs and heavy restrictions towards ‘life beyond the virus’. In the first three months of 2020, we had managed to outperform a very negative market, predominantly because of our exposure to high quality, defensive businesses. In April, when markets rallied strongly, led by lower-quality, cyclical businesses, we also managed to outperform due to a) strong performances from a number of our key positions and b) due to a strong rally in AMS, a company in which we had initiated a position in early in the month.

Our key positions that outperformed during April included STMicroelectronics, Cellnex and Bawag. STM is a semiconductor company exposed to industrial and auto end markets. Clearly, their current earnings are being negatively impacted by the global lockdown, but our original investment thesis was based more on the long term opportunity to improve margins led by product demand and mix changes. Cellnex, the telecoms towers business, has long-term contracted revenues and has just reported quarterly numbers which showed no detrimental impact from the Covid-19 situation. Bawag, the Austrian bank, is facing very tough conditions and has had to withdraw its current dividend proposal (alongside all other EU banks), however, our original investment thesis was based around the bank’s excess capital position and strong long term return on equity track record.

As mentioned above, our recent initiation in AMS was a strong contributor during the month. AMS, another semiconductor company, sells products used for facial recognition and display technology. They announced quarterly earnings during April that exceeded consensus estimates and they also gave guidance for Q2 that was higher than modelled by most sell-side analysts. Our largest detractors during the month were Telecom Italia, Alstom and Assa Abloy.

During the month, in addition to initiating a new position in AMS as discussed above, we also bought new positions in Embracer and Zur Rose. Embracer is a Swedish gaming company. They have grown both via M&A and organically and are still managed by the founder Lars Wingefors. Gaming has been an attractive structural growth theme in recent years and the lockdowns imposed during the recent virus outbreak have resulted in higher levels of gaming across the world. Zur Rose is a Swiss-based online pharmacy with a large exposure to the German market. German prescriptions are generally used in independent bricks & mortar pharmacies or via a cumbersome mail-order process. This market is on the verge of change with the government having recently passed legislation making e-scripts mandatory from 2022.

We are confident in our positioning and will continue to retain balance in our exposures by considering two types of business for investment; those where we see high and sustainable returns that are undervalued by the market and those companies where we can see a material improvement in medium term business prospects.



Dividend: A payment made by a company to its shareholders. The amount is variable, and is paid as a portion of the company’s profits.

Cyclical business: have a direct relationship to the economy