June has been another tough month for performance. In April and May, we suffered from our lack of cyclical/reflation exposure, but in June, with conditions somewhat reversing, we didn’t manage to bounce back, which is disappointing.

Our best performing positions included Cellnex, Nexi and Novo Nordisk. Cellnex, the Spanish towers company, has bounced back along with the fall in long term bond yields. Nothing operational has really changed in this steady and predictable business. Nexi, the Italian payments company, is benefitting from a pick-up in domestic consumer activity in Italy as the country relaxes Covid-19 restrictions. The crisis really seems to have accelerated the adoption of cashless payments and this should be a lasting benefit to the business. Novo Nordisk, the Danish pharmaceutical company, has been a very strong long-term performer for us and the shares continue to make progress driven by best-in-class innovation and the resulting attractive product cycles.

In a reversal to the trend of the past few months, our worst performing positions included IAG, Unicredit and Faurecia. IAG, the airline company, suffered from a market-level sell-off in ‘reopening beneficiaries’. Unicredit, the Italian bank, sold-off as investors anticipated a slower earnings recovery due to flattening yield curves. Faurecia, the French auto parts company, suffered from worsening sentiment towards cyclical businesses, as well as ongoing concern around the semi-conductor shortages being experienced by the sector.

During the month, we sold our position in STM and added a new position in Danone. STM, the French semi-conductor company, has been a good investment for us, but we are becoming concerned that the semi-conductor cycle may have peaked. Inventory-led swings in this sector can be very violent and we have erred on the side of caution; selling our position at the first signs of emerging end market weakness. Danone, the French consumer goods company, has underperformed in recent years. However, there has been a recent change in management, margins are lower than peers and some end market issues are improving. This is not dis-similar to our investment case on Beiersdorf which we bought last month. Both companies have what we would describe as unpriced optionality. We like these kinds of opportunities, especially when they are in companies with an inherently defensive, high-return profile.

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.

References made to individual securities should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase the security. Janus Henderson Investors, one of its affiliated advisor, or its employees, may have a position mentioned in the securities mentioned in the report.