With a slight decline of 3.09% (V share class), the NESTOR Europe Fund relinquished a small portion of the high increase in value gained since the start of the year in the third quarter, while the MSCI Europe benchmark index gained 2.11%. The overall performance since the beginning of the year is +21.91%, which is still well above the MSCI Europe benchmark index (+16.52%).
Consolidating core stock – Basic data remains positive
Some of the core shares in the portfolio, such as Fenix Outdoor, New Wave, Amplifon and H&H International were relatively subdued, despite convincing results. This development is completely normal and in line with our expectations. Quarterly views do not have any affect on our "value builders". We focus more on the internal activities of companies aiming to increase the value of their company in the long term.
Glass packaging making a comeback – Consumer behaviour is changing
It is currently clearly apparent that consumers are questioning their behaviour in terms of sustainability. Low-cost airlines and cruise operators in particular are most likely to suffer from the bad conscience of their customers. Given this scenario, glass packaging is making a comeback as a cleaner solution compared to alternatives made from PET. In particular, mineral springs are experiencing a veritable renaissance in glass bottling. In any case, the trend in the bottled water industry is designing an original bottle to increase the value of their own brand. We have therefore made two commitments in this sector in the form of Vetropack (Switzerland) and Vidrala (Spain). The industry is currently operating at almost full capacity, which tends to increase prices. Exceptionally high research and development applications are not needed, even though this sector is extremely intensive in terms of capital and energy. Vidrala has been a genuine success story in recent years, increasing its market share in Europe from 2 to 15%. The company is the market leader in the Iberian Peninsula. Continued, steady growth is expected in this sector.
Dynamic growth of Balco
The weighting of companies from the construction sector in the NESTOR Europe Fund has been above average in recent years. Reasons include a good market position, above-average profit margins and extremely good growth prospects. All of these arguments also apply to the Swedish company Balco, which was listed on the stock exchange in 2017. Although we did not consider the company a viable option at the time, we found it fundamentally interesting because it offered balcony systems for both new and modernised buildings. We gained a clearer picture in the meantime and invested in Balco when the price was weak. Unlike the individual solutions offered by local metal construction companies, Balco provides standardised balcony solutions that offer competitive advantages. In addition, the degree of innovation is much higher and also promises solutions for saving energy, for example. Balco currently has a record backlog of orders and is profiting from a high demand for the renovation of old buildings.
Outlook
Even though the stock market has already experienced a long-term upward trend, we currently consider asset class shares to be highly attractive. We can see neither an excessive overvaluation nor a dramatic economic slump on the horizon. Although sentiment is still trending towards the downside, it has not yet bottomed out and we have therefore taken a very cautious approach to cyclical stocks and acquired smaller initial investments because high quality is currently available at very low prices in this sector. We will continue to be very selective on weaker days and have accumulated some liquidity for this.
Capital flows tend to support equity markets, especially with regard to the development of bond market (negative interest rates).