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Global Leaders Equity Fund: January 2021


  • The risk-on environment following the positive results from three coronavirus vaccines in November continued into December. Smaller companies saw a significant share price rally. The Global Leaders Equity Fund (I class USD) returned 3.4% during the month.
  • A new position was established in the E-commerce giant Amazon.
  • New variants of COVID-19 now threaten for a darker economic tunnel, dampening the relief that was felt following the news of a vaccination roll-out. Central banks continue with easy monetary policy, which is likely to help investors continue to stay the course.

Market update

Vaccine optimism and continued easy money supply extended the equity market rally into December. As expected after some brinkmanship the UK and EU came to an agreement over their future relationship, while in the USA fiscal spending plans became more advanced. All of these events were positive for sentiment and investors enjoyed a risk-on environment. The performance of smaller capitalisation stocks was particularly strong with the light at the end of the COVID economic tunnel seeming brighter, and a risk-on environment developing. 

The Global Leaders Equity Fund (I class USD), focussed on mega capitalisation stocks, returned 3.4% with strong returns from technology holdings, while consumer discretionary names lagged. Samsung Electronics was the best performer, returning 23.6% on the back of increasing optimism over memory pricing. Alibaba Group was the fund’s worst performer declining 11.6%. China widened their anti-trust rules during November. There was fear that increased scrutiny of the firm’s monopolistic practices would result in reduced future growth. Our expectations remain that the firm will adapt practices to stay on the right side of changing regulation.

Trims were made to NXP Semiconductors and JP Morgan, while BlackRock was topped up. A new position was established in Amazon, the world leading on-line retail company and cloud services provider. Despite years of impressive growth, the company had historically failed one of the main criteria we use to be classified as a “global leader”, as they failed to sustainably meet their cost of capital at a reported profit level. Many of the reasons behind this relate to the huge investments for growth that the company makes, much of which they take high up the income statement. The web services business, which accounts for over half of the profit, looks set to continue to deliver high growth and margins for several years and consequently we believe that the cost of capital will continue to be met. A meeting with the company highlighted the moves the firm is making into adjacent verticals with very large addressable markets, encouraging prospects for advertising growth, including growth of Amazon Web Services, and the huge remaining growth opportunities outside of the USA. From our recent analysis and updated valuation model we believe that there is still plenty of upside potential for the stock. 

Other than the wonderful vaccine news from November, COVID-19 virus news has been increasingly negative. Two new variants, one in the UK and one in South Africa have been shown to have increased transmission rates. This means that economically things might well get worse in the near term however an end to economic lockdowns are in sight, due to the rollout of vaccination programs. Nonetheless, equity markets tend to discount short term difficulties and, with central banks still supportive and providing we see no further pathogenic mutations, the coming economic recovery and lack of returns available from other asset classes remains encouraging for equities.