Can you explain your management process for this fund ?
The investment process includes criteria to analyse the brand's strength as well as the company's operational, financial and extra financial excellence. By adopting an SRI approach in 2021, the management strengthened the fund's investment process. Environmental and social challenges are becoming a growing part of consumer concerns. They expect brands to inform and commit themselves. Ultimately, only the brands whose companies are committed to the field in a responsible manner will stand out from the public. These companies are thus building a foundation for creating sustainable value for their shareholders. For example, Microsoft's governance is certainly one of the best performers in US tech. Its compliance with regulations on customer private data reinforces the traction of its Azure offer in the public cloud.
How do you find the “leaders of the future” ?
The central issue that drives management is to ensure that each company whose stock is held in the portfolio remains precisely the leader in the future. The ability of the brand to engage with the consumer and the generation of cash flows are decisive criteria. As financing conditions tighten around the world, we prefer companies with strong balance sheets that will be able to seize opportunities. Intact Financial Canada's leading property and casualty insurance company is a good example of this. With positions twice as large as its competitor in the auto insurance segment, it benefits from higher pricing power that secures its free cash flow generation. The group was thus able to take over the RSA group's insurance business in the United Kingdom, taking a position among the top five players in the market.
How did CM-AM Global Leaders perform in the turbulent year 2022 ?
The year 2022 was the worst year for the fund since its inception. C shares fell by 21.5% *. By way of comparison, the MSCI AC World denominated in euros dividend reinvested posted a more modest decline of 14.7% *, which it owes in part to the oil sector. Relative to its peers, your fund of leading brands does not merit and ends up on a comparable performance. Moreover, he beat the World growth index by a short head. While the fund sold digital brands such as Paypal, Adobe and Netflix, whose post covid period proved difficult, the strengthening of luxury brands proved fruitful. In addition, it is worth taking a step back: 2020 and 2021 were years of extraordinary stock market performance with gains of 14.3% * and 22.3% *. See the stocks of these companies blow. 2022 is also an incredible opportunity for our long term investors. We were able to invest in ASML, whose long term growth for its advanced technology semiconductor equipment remains unmatched.
What is your forecast for 2023 ?
2023 begins with some progress - reopening in China, more attractive valuations, energy recovery plans. However, it is difficult to pass and we will steer the management between the risks of downward revisions of company growth estimates and sustainably higher rates. The quality of the fundamentals of the companies chosen is an important reminder. Management favours exposure to stocks with visible growth drivers (Eli Lilly, TSMC, or benefiting from the reopening of China (Aia, Daikin). Among our renaissance brands, Moncler remains a strong conviction as the acquisition of Stone Island is paying off. Finally, we are starting 2023 with a reasonable fund valuation of 24x the 12 month PE for sales and EPS growth of 7.5% and 10.5%.
Drafting completed on 01/02/2023