Summary

• The Fund returned 1.9%. The consumer staples sector performed poorly during the month.
• In the face of poor economic data, the US Federal Reserve delivered another 25bp rate cut at its October meeting. In regard to macro events, Brexit was delayed, Hong Kong reported a recession and Turkey invaded Syria following the departure of US troops, all of which had minimal impact to markets.
• Supported by easier monetary policy, equity markets moved higher during the month.
  
   

In the face of poor economic data the US Federal Reserve delivered another 25bp rate cut at its October meeting. In regards to macro events, Brexit was delayed, Hong Kong reported a recession and Turkey invaded Syria following the departure of US troops, all of which had minimal impact to markets.

While Johnson & Johnson shares ended up performing in line with the Global Equity Index, the company gave investors much to think about. The month started well for J&J as results were ahead of expectations and the firm made an offer to settle all outstanding USA opiate litigation. Mid-month the company announced a voluntary withdrawal of baby talc products as a “sub-trace” quantity of asbestos was reported to have been found during random tests by the FDA. The reported detection level of 0.00002%, was over 5,000 times below the level of 0.1% reported by the FDA in 1986 as giving the equivalent risk to background levels. Johnson’s Baby Powder sales represent a de minimis amount of sales for the company of 0.2%. Nonetheless, the recall resulted in considerable negative news and the stock price fell around 6%. Towards the end of the month the company reported that 15 tests on the same bottle and 48 further samples from the same batch found zero traces of asbestos. Investigations into the initial finding showed that the non-J&J testing laboratory used an air conditioner that itself was contaminated with asbestos, J&J shares recovered on this news. The company’s outlook which is driven by the pharmaceutical division, continues to look positive and the share price attractive. 

Anheuser-Busch was the main disappointment, seeing commodity price pressure and increasing competition. Full year guidance was reduced by 3-4% but shares fell more than 15% during the month. Thankfully the position had been halved in July in favour of other holdings. We had not however expected such poor results.

Prudential shares rose 12.8% over the month in the run up to the spin-off of UK insurance and asset manager M&G, after having suffered an extended period of poor performance.
We envisage that the “new Prudential”, i.e. the remaining US and Asia parts of the business, will be attractive to global investors. We have retained the small M&G portion for now. Though it does not fit with comfortably with the philosophy of the strategy, as we believe that the M&G share price is too low relative to the cash generation and the expected dividend stream. 

AstraZeneca shares continued to rise given results that were ahead of consensus and upgrades to guidance.