August was made up of two halves in the equity markets: the uptrend from July continued in the first portion of the month, while the latter half saw sharp profit-taking after Jerome Powel’s hawkish speech. The US economy is not showing any signs of abatement. The bond market meanwhile tightened significantly. The German Bund’s interest rate almost doubled month-on-month, the French OAT moved back above 2% and the Italian BTP returned to 4%. Volatility in the normally “safe” fixed income market continues to indicate deep overall uncertainty. In the foreign exchange markets, the dollar index (USD against a basket of currencies) maintained its upward trend to close the month at a 20-year high. Regarding commodities, WTI oil fell by nearly 10% over the month, returning to pre-Ukrainian crisis levels of late January 2022. Gold is trading in a well-defined sideways channel of $1,700/$1,800 (per ounce), despite aggressive monetary policies of hiking interest rates
The Alpha World Equity ESG fund meanwhile performed in-line with the practically unchanged Bloomberg World Large & Mid Cap Total Return Index. Those companies leveraging biodegradables (Darling Ingredients, Green Plains) contributed most to the performance of the fund, whereas the leading detractors were traditional economy stocks.
The 2Q2022 results of Darling Ingredients (+11% stock price rise) beat consensus expectations and guidance remains conservative. The Feed and Food divisional growth rates offset pricing headwinds in the Fuels division. Growing demand for fats and oils from the renewable diesel industry as well as incremental regulation to support biofuels adoption in Canada and California support the investment case.
Cowen (+11%) continued its rally until beginning August, after which Toronto Dominion Bank finally confirmed the acquisition. We have meanwhile shortlisted a few US bank candidates (with improving ESG data) as a new investment for the fund’s North American financial institution sector allocation. The new stock will replace the divestment of Cowen in September.
Green Plains (+3%) additionally posted better than expected 2Q results. Tight production utilization rates and higher product selling prices led to growing operating profits. Higher output of corn oil and the rise in protein levels of distiller grains will result in higher profitability and increased diversification over time.
Dell Technologies (-14%) confirmed the moderation in enterprise demand for PCs, servers and storage during the tech earnings season. Management also significantly revised its PC unit outlook for the year from 330 million to roughly 290 million.
Apart from UFP Industries’ July release of strong quarterly results, no other known news contributed to the company’s stock price decline of -13%. The company is meanwhile cyclical in nature. Teleperformance’s stock also lost -13% on no news. Its quarterly results in July showed continued steady growth and the sell-side analyst consensus continues to show upward sloping earnings expectations. The buy-side is perhaps penciling in inflationary margin pressure since 80% of operating costs are personnel expenses. The company employs 420,000 staff worldwide and a significant portion of the call-center workforce is paid minimum wage.
Fund management team
The two-fund manager team removes the key-person-risk and ensures continuity of Colibri AM’s investment process for the long run.
While each investment is validated by both fund managers (via ESG trajectory screening, fundamental analysis, portfolio construction), Marc et Frédéric are each able to carry out every step of the investment process independently. The bottom/up investment process largely focusses on choosing the best companies for each sector of the universe.
The information presented above does not constitute either a contractual element or an investment advice. Past performance is not a reliable indicator of future performance. Management fees are included in the performance. Access to the products and services presented here may be subject to restrictions for certain persons or countries. Tax treatment depends on individual circumstances.
This fund investment promotes environmental, social and governance (ESG) criteria within the meaning of Article 8 of Regulation (EU) 2019/2088 on sustainability reporting in the financial services sector (the so-called “SFDR Regulation”). It does not aim to be a sustainable investment. It may invest partially in assets with a sustainable objective, for example as defined by the EU classification.
This fund investment is subject to sustainability risks as defined in Article 2(22) of the Regulation (EU) 2019/2088 on sustainability reporting in the financial services sector (the “SFDR Regulation”), by an environmental, social or governance event or condition which, if it occurs, could result in an actual or potential negative impact on the value of the investment.