With an increase of 16.54% (MSCI Europe +12.47%), the NESTOR Europe fund achieved one of its best ever quarterly results during the reporting period and managed to compensate in large part for the disappointing results of the previous year within just the first quarter.
When the market is at its lowest point, you have to go all in on investments - Central banks raise the white flag
"When the market is at its lowest point, you have to go all in on investments" is one of our maxims, reflecting our experience from the past years. The markets are all too quick to shoot up again after temporary crashes, causing laggards and hesitaters to miss out on valuable stock gains, which will be irrecoverable in the long run. The extraordinary market recovery was made possible due to the two large central banks hoisting the "white flag" and returning to dovish stances. Concerns about cyclicality have also been put into perspective by now, although it is possible that the jury is still out on this matter. The automotive sector especially is weighed down heavily by uncertainties caused by the put-up crusade against diesel engines. However, numerous global megatrends continue to allow agile companies to prosper even in a challenging environment.
Significant performance contributions by Eckert & Ziegler, Acando and Tinexta
After we first met the CEO of Eckert & Ziegler Strahlen- & Medizintechnik AG from Berlin in autumn 2017, Dr. Andreas Ziegler convinced us of his company's outstanding long-term business prospects. Since then, we have achieved a return of just under 200% with this stock for shareholders of the NESTOR Europe fund.
A surprising extraordinary event also took place at the Swedish IT company Acando, which received a buyout offer from the Canadian company CGI Nordic at a 44% price premium. As we are heavily weighted on Acando at 1.80%, this buyout also resulted in a fair additional profit. In our third 2018 quarterly report we already pointed out the sector of Swedish IT companies, which we considered noticeably undervalued compared to international peers. In the wake of the Acando buyout, Knowit and Softronic also posted significant gains. The substantial upwards movement of Tinexta, an Italian supplier of digital trust solutions, is also worthy of mention.
Premium brand names show solid performances
One of the previously mentioned global megatrends is the rise of a new middle class in Asia and its adaptation to Western lifestyle and nutrition habits. Traditional brand-name manufacturers from Europe are among the main beneficiaries of this trend. Among this set of companies, Moncler continues to dazzle us and breathe fresh air into the fashion world of Milan. Adidas and Nestlé also continue their very robust performances. We once again added the latter stock to our NESTOR Europe fund during the first quarter, partially due the relatively mature stock market cycle.
Spain & Poland on the watchlist
Following our extensive studies of Scandinavian and Northern Italian companies in the past years, we continue our endeavours to discover new profitable investment targets. We already entered our first Polish position with Ambra. The Trevian company Schloss Wachenheim AG is their majority shareholder. Ambra is currently on the road to success by tapping the Polish markets for sparkling wine, wine and cider („Cydr Lubelski“). Despite the recent significant increase in stock price, its dividend yield continues to hover around 4.5%.
Regarding Spain, we will begin to get up close and personal with some entrepreneurs from Madrid in 2019. Relevant companies have already been screened.
Outlook
Although the current recovery is not expected to continue at the same speed, and reversals need to be factored in, we continue to see opportunities in the stock market. Many companies are still far away from their all-time highs and certainly have upward potential. However, solid fundamentals - which cannot be found at every company by any means - are a necessary condition for this upward potential. Supposedly cheap companies whose business models are being disrupted by competitors should be avoided. In this respect, an active and dedicated fund management will once again be the key to success in this year. Under no circumstances should anyone curtail their quality parameters in this regard.