Global Equity Growth Portfolio: March 2024

11 April 2024

March was another positive month for global equities with the FTSE All-World Index gaining 3.1%. The energy and materials sectors were particularly positive with the equity market rally broadening out from Artificial Intelligence (AI) stocks. Geographically too the market broadened with equity prices in Europe and Japan climbing. The Bank of Japan (BoJ) announced an end to their radical negative interest rate policy mid-month and increased interest rates for the first time in 17 years.

The Ashburton Global Equity Growth Model Portfolio (USD) gained 2.6%. The best performing stocks held were Argonaut Gold 69.9%, Nvidia 14.2% and Vermilion Energy 12.6%. A largely stock-based acquisition of Argonaut was announced by Alamos Gold. Holding Argonaut has been extremely frustrating and we believe Alamos is acquiring the firm at a very low price considering the productive low-cost Magino mine will be closed to full operation.

The worst performing holdings were Adobe-9.9%, Yum China 6.9% and AMD 6.3% who all posted declines.

Adobe announced worse-than-expected guidance highlighting the threat of alternative generative Artificial Intelligence (AI) products to their core business. While the firm has been a beneficiary of AI until now, the rise of credible alternative technologies to Adobe Photoshop was seen as a concern by management and investors. With the shares trading on a high multiple, reflective of recently experienced growth, there seems little margin for disappointment without negative share price reaction. The position was sold.

Many economists like to talk about economic cycles. While perhaps an over-simplification, the terminology does provide at least an illusion of understanding and when followed by others can create herd effects and be self-fulfilling. Currently these economists are pointing out that  many western economies are entering an inflationary boom with both economic growth and inflation rising. Other market commentators like to talk about the duration of bull markets. Most cyclical economists and market commentators are predicting a benign environment for equities. We broadly agree in the short term.

Our view, however, is a little more nuanced as equity prices are affected by earnings growth, money supply, valuation, and sentiment. The current outlook for all of these is relatively supportive. Economic growth and earnings growth tend to go hand-in-hand. Though extended in certain areas, overall valuation multiples are around long run average levels. Money supply is a combination of interest rates, quantitative easing and tightening measures. We are a little more cautious here than others are in the medium term. In the short term with the US election later this year, we anticipate little other than positive short-term change. Sentiment is reflected in share price momentum and can be particularly fickle. It is what can drive stock prices way above, and way below, intrinsic value for the market, and in more narrow niches.

Our medium-term view is a little less optimistic. Shocks can change directions of markets and are, by definition, hard to anticipate. Markets are currently pricing in very little for such events which, given recent experience, are much more common than people think. Price volatility risk currently seems mispriced.

Disclaimer

Waystone Management Company (Lux) S.A. is regulated by the Commission de Surveillance du Secteur Financier (CSSF) (ref A00000395 & S00000734), Waystone Management Company (Lux) S.A. is a company located in Luxembourg, L-1273 Luxembourg at 19, Rue de Bitbourg. This document is issued by Ashburton (Jersey) Limited (The Investment Manager) which has its registered office at IFC1, The Esplanade, St Helier, Jersey JE4 8SJ, Channel Islands and is regulated by the Jersey Financial Services Commission. Ashburton Investments is a registered trading name of Ashburton (Jersey) Limited. In the event a potential investor requires material risks disclosures for the foreign securities included in a portfolio, the manager will upon request provide such potential investor with a document, outlining potential constraints on liquidity & repatriation of funds; Macroeconomics risk; Political risk; Foreign Exchange risk; Tax risk; Settlement risk; and Potential limitations on the availability of market information. The value of participatory interests and the income from them may go down as well as up and is not guaranteed. Past performance is not necessarily a guide to the future performance. Where an investment involves exposure to a currency other than that in which it is denominated, changes in rates of exchange may cause the value of the investment to go up or down. CIS portfolios are traded at ruling prices and can engage in borrowing and scrip lending. A full detailed schedule of fees, charges and commissions is available from Ashburton on request and incentives may be paid and if so, would be included in the overall costs. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The manager has a right to close the portfolio to new investors in order to manage the portfolio more efficiently in accordance with its mandate. This document does not constitute an offer or solicitation to any person in any jurisdiction in which Ashburton Investments is not authorised or permitted to communicate with potential investors, or to anyone who would be an unlawful recipient. The original recipient is solely responsible for any actions in further distribution of this document and should be satisfied in doing so that there is no breach of local legislation or regulations. This is a marketing communication. Additional information about this product, including brochures, application forms and annual or half-yearly reports, can be obtained from the Manager, free of charge, and from the website: www.ashburtoninvestments.com. In South Africa, the Fund(s) is/are approved for promotion under section 65 of the Collective Investment Schemes Control Act 2002. The Fund Prospectus, and further information including pricing and changes, may be viewed at the Fund’s representative office in South Africa: Ashburton Management Company (RF) Proprietary Limited (“Ashburton CIS”), 3 Merchant Place, 1 Fredman Drive, Sandton 2196. Ashburton CIS is an approved collective investment schemes manager regulated by the Financial Sector Conduct Authority and a full member of the Association of Saving and Investments South Africa.