Investors in the Goodbody Global Leaders Fund have done well this year, with the fund appreciating by 41% year-to-date in mid-November, gross of management charges. The fund strategy is to invest in 40 equities that dominate their industries, and the fund manager’s investment rationale is simple but compelling:
+ Sustained leadership position delivers more profit.
+ Track record of innovation sustains the leadership position, so the leaders of today can also be the most profitable companies of tomorrow.
+ Global leaders consistently widen the gap with competitors. This can lead to significant share price outperformance over time.
The fund publicly discloses only its top ten holdings: Microsoft, Intuit. Moody’s, Alphabet, Zoetis, Tyle Technologies, Paylocity, ServiceNow, Hermes and Thermo Fisher. Beyond Microsoft and Alphabet, the selections aren’t just the usual suspects, and stock-picking craft applies.
Recently added to Global Leaders was Sherwin-Williams. The Cleveland company is a dominant manufacturer in paint and industrial coatings, with operations in over 120 countries. Its market cap is currently c.$88bn, and the company’s qualities aren’t a secret, as the stock trades on a p/e multiple of 46. The Ohio giant knows how to exploit its market position, with a net profit margin of 10%.
Another interesting pick is ServiceNow (pictured), a California software company that develops a cloud computing platform for managing digital workflows. ServiceNow set up an office in Ireland in 2018, and earlier this year the company announced 300 additional roles in Dublin over the next three years. Its net profit margin is only 4.2%, but the Goodbody team obviously see upside. The stock has appreciated 28% year to date, and the p/e ratio has expanded to 620.
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Goodbody Global Leaders is marketed by New Ireland, and has a fund size of €110m. Launched in 2016, the 5-year pre-charges annual return has been 23.9%.
Energy Prices Drive Inflation Higher
This year’s sharp spike in energy prices is reflected in the performance of Indexed Global Energy and Metals Fund, a small fund operated by Zurich. The energy/metals split is roughly 50/50, with the largest exposures to oil products (27.5%), natural gas (11.2%), gold (18.5%) and copper (8.0%).
The fund size is only €16m and invests in a passive ETF managed by BNP Paribas. On a 10-year view, the fund has shown next to zero annualised growth. However, through 2021 the fund value has appreciated by 33.5%, pre-charges.
Higher energy prices are one of the main factors driving inflation higher around the world. The transience of this trend, or otherwise, is exercising investment experts everywhere. The ‘House View’ at Aviva Investors is that there won’t be a lift-off in US interest rates until late 2022 or early 2023, with the ECB likely to be at least a year or more after that.
However, Aviva cautions that the Fed, ECB and Bank of England have expressed concern recently over persistent supply constraints, and the potential for isolated increases in goods price inflation to become more widespread, feeding into wages and price-setting more broadly. In that case, says Aviva, interest rates could rise sooner and more quickly than anticipated.
