1st quarter 2023
BL American Small & Mid Caps aims to gain exposure to the most dynamic segment of the US equity market by constructing a concentrated portfolio of high quality growth companies with a market capitalisation of less than 30 billion USD.
The manager distinguishes between mid-cap companies (7.5 billion to 30 billion USD) and small caps (500 million to 7.55 billion USD).
By combining companies with growth potential (‘Growing Franchise ') with companies with more stable profiles (’ Consistent Earners'), he is able to build a portfolio with long-term attractive risk-return characteristics and reduce volatility in the portfolio.
Positioning and Recent Developments
At the end of March 2023, BL American Small & Mid Caps was invested in 45 individual stocks, with the top 10 representing 31.8% of the portfolio.
The Fund held 1.5% in cash.
Reflecting the Business-Like Investing methodology, sector allocation is focused towards IT, Industry, Health Care, Consumer Discretionary and Consumer Staples. Conversely, the Financials sector remains underweighted, with no banking stocks. The Real Estate, Utilities and Energy sectors are absent.
In terms of market capitalisation, approximately 3/4 of the Fund's assets are invested in mid-cap stocks.
The Fund Manager made few changes to the portfolio during the quarter. No new stocks were added to the portfolio. In March, he sold Lancaster Colony on valuation grounds as the stock performed strongly; and Advanced Auto Parts, one of the portfolio's few ‘value 'stocks, was sold due to operational inefficiencies. Unfortunately, the company has not been able to achieve sustainable revenue growth on a like for like basis or improve margins as the Fund Manager anticipatef.
PerformanceNote : Performance data net of fees in USD. Past performance is not a guide to future performance. References to a market index or peer group are made for comparison purposes only; the market index is not mentioned in the investment policy of the sub fund.
Source: BLI/Lipper. Data as of 31 March 2022.
|Since inception (16/11/2015)
|MSCI US Small + Mid NR USD
This was a quarter that will be written into the textbooks and studied for years. The second and third largest bank failures in history did not stop the Fed from continuing to raise rates in efforts to curb what has become a prolonged inflation problem. It has not been an easy ride for investors as headline risks and volatility swings have shaken markets. Investors favored large- over small-caps and Growth over Value with Technology as best and Financials as worst performers.
Over the quarter, not surprisingly, the lack of investments in banking stocks benefited the portfolio as March was marked by the failure of several major US banks. The absence of Energy, Real Estate and Utilities and the overweight in IT also contributed to the Fund's relative performance over the period. Conversely, the overweighting in Health Care and Consumer Staples slightly penalised the portfolio.
Among the main individual contributions, we can highlight the positive impact generated by a number of technology (Ansys, Littelfuse, CDW) and Industry (SiteOne Landscape Supply and Watsco) stocks. In the Financials sector, MSCI also brought positive contribution. On the negative side, we note several stocks from the Health Care sector (Globus Medical, Waters Corp, Insulet) as well as Domino's Pizza (Consumer Discretionary) and Nordson (Industrials).