Our portfolio

The view from our Investment Manager, 31 December 2021

Over the fourth quarter of 2021, the Company’s total shareholder return and NAV total return were 2.4% and 2.3% respectively, with the MSCI All Country World Index (ACWI) returning 6.2%.

The fourth quarter has brought to a close another eventful year, both in the real world and in financial markets. Market drivers were varied and volatile whilst the real world grappled with significant challenges such as resurgence of COVID-19 and Omicron, rising cost of living not seen for a generation, extreme climate events causing misery for millions and continuing social unrest and polarisation. The MSCI ACWI was led by the US market over the quarter (9.5%) with all other major regions underperforming, notably Japan (-4.4%) and China (-6.5%). From a sector perspective, technology continued to dominate (12.7%). There was a significant deviation by size/market cap, with large cap outperforming small cap by 6.0% for the quarter. 

The Company’s portfolio suffered relative to the benchmark by not holding US technology firm Apple, the largest company in the index, which rallied over the quarter returning 25.1%. Sea LTD, owned by Sands, was the other largest detractor to relative performance over the quarter, returning -30.1%. The Singapore based consumer internet company reported strong earnings over 2021. However investor sentiment of a predicted slow of growth in technology-related companies following strong performance over the pandemic, as well as fears over interest rate hikes caused the stock to tank.  In contrast, Vulcan’s holding in the American technology company Nvidia, was the leading contributor to relative return over the quarter, delivering an absolute return of 41.3% and contributing +0.3% to relative return. Nvidia is mostly known for designing graphic processing units for gaming and chips for mobile computing. When the CEO of Meta Platforms, Mark Zuckerberg, announced that his vision for Meta is in interactive virtual technology, Nvidia’s stock price soared as investors expect Nvidia to play a large role in the commercial application of the metaverse. With regards to regional exposure, the Company benefitted from its underweight position in emerging markets vs the benchmark, as the region underperformed over the quarter. While the overweight in the consumer services sector was a drag on the Company’s relative performance.

Over the quarter, a position was established in Tencent, a Chinese technology company. GQG purchased the stock on the back of continued growth in demand for cloud computing. A position in Epam systems was also initiated by GQG following strong revenue results for the third quarter of 2021, beating analysts’ expectations.

Over the quarter, we maintained the level of gross gearing at the central target level of 10%. Some cash rebalancing took place as markets favoured different styles over the quarter in order to capture profits, however the portfolio continues to be structured as style neutral, across skilled stock pickers with different investment approaches in order to maintain a high conviction, diversified portfolio.