Swedish special path proves its worth
With an increase of +25.84% (V share class) the NESTOR Europa fund performed very well in the second quarter (MSCI Europe +13.48%). This compensated for much of the disappointing performance in Q1. With 20.89%, Sweden currently ranks second in the country weighting, and contrary to numerous press reports to the contrary, the Swedish Corona Special Path has proved its worth.
Abrupt decline in severe respiratory diseases (ARE) reduces worst-case fears
Since it was actually observed quite early on that the ARE rates have fallen sharply since the 10th week (2.3. - 8.3.2020), the "lockdown" at the end of March got us on the wrong foot. Especially among adults, such a significant drop in ARE rates over several weeks was extremely unusual and could not be observed in any of the three previous seasons (source: Robert Koch Institute). The alleged overload of the German health system had thus become extremely unlikely at a very early stage. In addition, we had studied the new corona virus very intensively and had come to the conclusion that corona viruses have a highly seasonal course and have a clear preference between December and April. There were also the first robust studies indicating that the mortality rate of this new virus would be more in line with that of a medium to severe influenza rather than the high death rate of the "siblings" MERS or SARS. In this respect, we were relatively certain that the measures taken out of caution would have to be stopped completely after Easter, especially as the comparatively low death rates in Japan and South Korea gave further cause for confidence.
Market distortions boldly used for regrouping
However, the apocalyptic portrayal of the Corona situation by the media and the behaviour of politicians, who, after the horror images from Bergamo, threw surprisingly horror scenarios on the wall even for Germany, ultimately prompted us to adopt an unusually short-term way of thinking and proceeding. The effects on consumer and investment behavior had to be immediately adjusted to the new situation, while long-term megatrends faded into the background. We identified positive prospects in particular for DIY stores (Hornbach Holding), mobile homes (Kabe, Trigano) and in the leisure and outdoor segment (Thule, Fenix Outdoor). We considered the construction sector to be comparatively stable, while we took a rather critical view of cyclical industrial sectors. In addition, we saw opportunities in the logistics and infrastructure sector (DFDS), as it was disproportionately underperforming. On the other hand, defensive sectors such as glass (Vidrala, Vetropack) or beverages (Olvi) as well as stocks from the luxury segment (Kering, Moncler) were sold at high levels.
Ökoworld AG with profit explosion and all-time high
We had already pointed out the special position of Ökoworld AG in the fourth quarter, as we expected a considerable increase in net income for the year due to the constantly high inflows into the fund and high performance fees. And indeed, the net profit increased by about 187%, so that our expectations were even slightly exceeded. This performance record is remarkable, as high severance payments were made in the spring due to a restructuring of the sales force. As the company can rely on a number of savings banks with strong sales, we remain confident and expect continued strong regulatory tailwind. Although this share also fell considerably at times, to less than € 10, a new high of over € 20 was reached shortly afterwards.
Outlook
Once the Pandora's box has been opened in a paper money system, it is difficult to get out of it. Maybe "you" don't want to. In this respect, the establishment of Japanese conditions in Europe is hardly surprising, corona or not. This means oversized economic stimulus packages that are largely unproductive and, of course, further, enormous money supply expansions. To this extent, the high liquidity should continue to flow into the markets. Prosperity on a broad front is not created in such a situation, but rather destroyed. However, despite the great economic uncertainty, we are certainly also targeting attractive areas. Every situation produces winners and losers. We remain flexible in order to generate added value for our shareholders. With a capital market interest rate of around zero, which is likely to remain permanently low, the "benchmark" is extremely low.
Dirk Stöwer, Kontor Stöwer Asset Management GmbH