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Global Equity Growth Portfolio: May 2024

Global equity markets rose in May. Overall, the FTSE All World Index gained 4.1% while the Ashburton Global Equity Growth Portfolio (USD) returned 4.7%. Outperforming stocks held during the month included Nvidia (26.9%), Rexel (20.7%) and Enphase (17.6%).

Delving into the Nvidia results, which were again ahead of consensus expectations, management’s positive outlook for AI spending helped explain such a big share price increase. Better earnings forecasts were provided by sell side analysts for Rexel prior to their capital market’s day on 7 June. Yearly targets are likely to be upgraded and perhaps the company will outline scope for margin improvement and their capital allocation plans. Enphase’s share price increased following President Jo Biden’s proposal to increase tariffs on Chinese solar panels. Laggards included Tripadvisor (30.3%), Expedia (16.2%) and Duolingo (15.2%), who all posted declines. Our view on the travel sector remains positive. However, both Expedia and Tripadvisor disappointed the market with their results and additionally, the potential takeover of the latter by a related party fell through. Very impressive growth was reported by Duolingo who saw a 44.9% increase in revenue, however shares declined over the month. Expectations for the future growth rate of the firm have fallen modestly but there remains tremendous scope to better monetise the userbase.

For good reason, portfolio activity was somewhat elevated with new purchases made of Chinese e-commerce firm PDD, Spanish cosmetics giant Puig Group, and total sales being made of Argonaut Gold and Match Group. Rapid ecommerce growth from PDD has seen the firm take significant market share and the firm looks set to continue to experience growth levels which do not seem to be factored into the current share price.  Olfactory giant Puig launched their initial public offering, and we considered the shares simply too cheap given the positive market share gains and their ownership of major perfume brands. Match Group had continued to disappoint both market and our own expectations with a declining userbase of Tinder and ever more expensive subscriptions; while Argonaut, as previously noted, is being taken over.

Justification of short-term movements of the equity market, as discussed last month, is something of a fool’s errand. Indicators in the long term however do remain generally positive for equites with companies generating aggregate earnings growth, liquidity remaining buoyant, and valuations not being overly stretched. Many elections will occur globally this year and, while technically independent from governments, central banks historically appear to have supported liquidity in election years. More cautiously, thinking longer term, equity market corrections have often historically been foreshadowed by high bond yields and low equity risk premia. Yields of bonds do continue to be somewhat at odds with the earnings yields of equities though this is not currently at such levels as to cause great concern.


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