Fundsmith Emerging Equities says that, during the first half of its financial year, the net asset value grew by 11.6% all of which occurred in the final week of the period. The market value of the company’s shares increased by 6.2% over the period and, at the period end, the shares stood at a 2.1% discount to the NAV per share. Over the same period, the benchmark, (the MSCI Emerging & Frontier Markets Index measured on a net sterling adjusted basis) rose by 17.1%.
Top Five Contributors Contribution % Of which currency %
Godrej Consumer Products Ltd +1.07 +0.31
Philippine Seven Corp +0.96 +0.30
Marico Ltd +0.93 +0.27
Hypermarcas SA +0.89 +0.67
Unilever Indonesia TBK PT +0.81 +0.27
Top Five Detractors Contribution % Of which currency %
Nestle Nigeria Plc -0.46 -0.56
Unilever Nigeria PLC -0.39 +0.04
Edita Food Industries Reg S -0.39 +0.22
Guinness Nigeria Plc -0.31 +0.04
Nigerian Breweries Plc -0.25 -0.48
The manager’s report notes that emerging and frontier markets began to show distinct signs of life over the period, partly and ironically as a safe haven as investors took fright over the Brexit vote and sought an alternative to European investments, an effect compounded for investors in the UK by the decline in sterling over this period. However, so far the rush to reinvest in emerging markets and the resulting performance has benefitted FEET less than the Index. The top three holdings in the Index are Tencent, Samsung and Taiwan Semi. These stocks rose 28.5%, 29.0% and 20.6% respectively in the period. They say these stocks are not amongst those which would ever fit within FEET’s investment strategy. They believe the beneficiaries of the revival of interest in emerging markets have unsurprisingly been stocks of companies which are a) large and therefore easy to deal in and which by definition dominate the Index; and b) mostly in sectors in which they would not invest. Although they think that in the early stages of renewed interest in emerging markets the large cyclical stocks and sectors which benefit most are not the ones in which they would invest.
FEET : Fundsmith Emerging’s large cap underweight hampers returns