Global Equity Growth Portfolio: February 2021

Summary

• The FTSE All-World Index declined 0.4% in January, while the Global Equity Growth Portfolio fell 0.1%. 
• January saw the US Democratic Party taking control of the senate paving the way for fiscal stimulus measures.
• Equity markets continue to be supported by easing monetary policy.

Market update

The FTSE All-World Index declined 0.4% in January, while the Global Equity Growth Portfolio fell 0.1%. The month began with the Democratic party taking control of the Senate at the Georgia elections. This should pave the way for President Biden to enact fiscal stimulus measures. Meanwhile the equity market continues to be driven by easy monetary policy. There are signs of excessive optimism in some areas of the market. Social media induced a retail bear squeeze on institutional short sellers of a number of stocks, most notably GameStop and AMC.

The top performing holdings during the month were Eli Lilly (up 23.2%), Tencent (up 20.8%) and Alibaba (up 9.1%). While the top detractors were Visa (-11.7%), Adobe (-8.3%) and Kerry Group (-6.3%).

During the month, we sold our position in Mastercard and initiated a position in Axon Enterprises. 

Axon is the largest provider to US law enforcement of TASER and on-body cameras. Its innovative solutions which include a cloud-based evidence eco-system and subscription payment model mean the company achieves very low customer churn rates and a retention ratio of around 120%. Axon is gradually expanding by growing internationally and moving into adjacent markets such as federal, corrections and private security with recent contract wins with US Customers Control and Border Protection and the Department of Defense. We expect these adjacent markets along with a new record management and dispatch offering to double Axon’s total addressable market.

The speed and efficacy of vaccine roll outs are the biggest swing factor to forecasts of the global economy. Early data from Israel and the UK suggest that vaccination programs are having the desired impacts. As economies recover, supportive measures will begin to be removed by central banks and governments. All seem mindful to do this in a measured and gradual way. While our own measures of value are conducted over long time horizons, we are conscious of the huge impact these supportive measures have had on equity prices. We do not anticipate substantial change on this front in the near term.

This makes us continue to see upside to global equity markets generally – though there seem obvious speculative areas to avoid.