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NESTOR Europe - Quarterly Report 4/2020

Nestor Europe closes at all-time high

Performance 2020: +7.56% vs. -2.54% MSCI Europe

With an increase of +16.15% (V share class), the NESTOR Europa fund once again performed very well in the 4th quarter, while the benchmark MSCI Europe only gained +11.20%. For 2020 as a whole, this results in an increase of +7.56% and thus a significant outperformance of +10.10% (MSCI Europe -2.54%). The performance of the V share class since launch on 01.07.2016 increased to +59.73% compared to +35.49% for the MSCI Europe. This gives the fund an annual performance of +10.96%, which corresponds to an excess return of +3.98% p.a.

Top results in unusual times
When selecting our fund investments, we generally assume that the economy can unexpectedly enter difficult waters. In such phases, therefore, only minor corrections are necessary, and after particularly sharp price falls we usually even stock up our favourites. In the course of the Corona crisis, we put all business models through their paces. Surprisingly, however, many companies hardly suffered any losses in 2020 or even reported top results. For example, the construction sector (H + H International A/S, Nordic Waterproofing AB, Sto AG) was hardly affected by closures and the IT services sector (Softronic AB, Knowit AB) even found itself on the sunny side due to the home office boom. Top performers included online credit portal Gruppo Mutuionline S.P.A., ESG fund provider Ökoworld AG, Hornbach Baumarkt AG, mobile home manufacturer Trigano S.A. and furniture retailer Kid ASA.

Ökoworld AG will post a huge return from performance fees for 2020 due to the sharp increase in management volumes (approx. +50%) and the very good performance of the funds under management. The good performance should also provide a noticeable tailwind in sales. We therefore assume that the EUR 3 billion fund volume mark will be reached a good year earlier than we expected.

The dynamic demand situation at Trigano should presumably continue in 2021, as the travel restrictions should fuel the urge for individual holiday planning by means of mobile homes, while Hornbach will tend to be slowed down in the short term by the effects of the lockdown. However, the first quarter has rather little significance and catch-up effects should provide some compensation later on.

On balance, we were thus able to use the market turbulence in 2020 as a whole to expand our outperformance quite substantially. The large positions in Amplifon S.p.A and Adidas AG were sold after reaching the ambitious price targets. The Danish container giant A.P. Møller-Mærsk A/S was newly added to the portfolio after the sector situation consolidated in recent years.

Northern Europe share expanded to 50%
As we reduced the German share in recent years, we increased the weighting of Northern Europe. On the whole, we find the investment climate and the infrastructure situation there more pleasant. Punctual trains, powerful mobile phone networks and safe bridges can be found everywhere in Europe. In Germany, however, such key factors have degenerated into the eye of the needle. Even the intensive care beds, which are important in a pandemic, were noticeably reduced in 2020, which almost leaves one speechless in view of the supposed overload of the health system and the lockdown consequences. Moreover, for valuation reasons, we are hardly active in Switzerland any more.  We have reduced this share in favour of Italy and Spain.

Outlook
Rising commodity prices, higher container freight rates and the cycle that has started in the chip sector are not parameters of a global economic crisis. In particular, the good development in the Far East is likely to be largely responsible for this starting position. Due to the hype around digital business models, we are currently finding many exceptional conventional companies at favourable prices. However, under certain conditions, we naturally also invest in technology. So far, this has regularly been a good mix to be able to beat the market.

Dirk Stöwer, Kontor Stöwer Asset Management GmbH