EP Global held back by US and banks exposure – EP Global reports that, for the year ended 31 December 2018, its NAV fell by 8.6%, adjusting that return for the 6.5p dividend declared for the year (a 5.5p normal dividend and a 1p special dividend) gives a total return on NAV of -7.1%. The discount narrowed a little and therefore the return to shareholders was -4.2%. The company compares these returns to the All-World Index, which returned -3.4% and the UK’s All-Share Index, which returned -9.5%.
The chairman said ” Our relatively low weighting in the USA held back performance in 2018, as did our significant investment in bank shares. However, we benefitted from the more defensive strategy of our investment manager including an increased investment in telecom shares. We also enjoyed an uplift from our holding in Edinburgh Partners which was taken over by Franklin Resources, Inc.”
The investment manager’s statement focuses more on the macroeconomic backdrop than the portfolio. The manager does discuss why he sold a few holdings: “In terms of sales over the year much of what was done was in response to share price appreciation, either through trimming positions or the outright sale of stocks such as Baidu, the Chinese-based internet search provider and Ubisoft Entertainment, the French based video game company. There were some holdings where our view on the prospects changed and a sale ensued as a consequence. The first of these was Celgene, the US based global biopharmaceutical company, where we became increasingly concerned that the company was unlikely to repeat its previous successful drug acquisitions and there was a high probability of dilutive/destructive use of free cash-flow. The shares were therefore sold. Subsequently the company was bid for, but at a price below where we had exited. The second share where our view changed was the Chinese car seat manufacturer Goodbaby International. We had owned these shares in anticipation of both revenue growth and margin improvement and there were signs that this was unfolding. Following a very sharp upwards move in the share price we began selling the shares. Subsequently the share price fell and we became increasingly concerned that the purchase by the company of retail assets owned by the Chairman might lie behind some softer trading numbers. In such cases caution is the order of the day and we sold our remaining holding.”
EPG : EP Global held back by US and banks exposure