The global stock market fell in October, as credit conditions tightened and doubts about the return on investment from AI capital expenditure hit US technology shares.
Evenlode Income rose +7.7% in the month, compared to a rise of +1.1% for the FTSE All-Share and +1.6% for the IA UK All Companies sector. Performance was broad-based, with the strongest contributors RELX, Experian, Sage Group and LSEG – whose share prices continued to recover from the first-quarter sell-off. RELX and LSEG reported good results, with full year guidance upgraded for LSEG. Another highlight was the performance of some of the recent new additions to the fund. Avon Technologies (+39%), Greggs (+14%) and XPS Pensions Group (+13%) all released positive updates in October. The only negative contributor of note was Games Workshop (-12%). Although full year guidance was reiterated in September, shares continued to fall back following a strong run.
We added two new positions to the portfolio in October – Fever-Tree and Volution. Fever-Tree has experienced a significant valuation de-rating over recent years as UK growth slowed and cost-inflation impacted profitability in the post-Covid period. We think this has created an attractive entry point. Brand health remains strong, and the US opportunity, strengthened by its recent partnership with Molson Coors, is compelling – as are opportunities for broader global growth over coming years. Volution is a niche market leader, operating in the ventilation sector and underpinned by a range of structural growth drivers across its UK, Northern European and Australian markets. Management are strong capital allocators, and Volution has compounded earnings at an average rate of +12% over the last decade. Both Fever-Tree and Volution were added on a free cash flow yield of more than 6%.
We are a long way through the third quarter results season now, with more than 75% of the portfolio having updated the market. The free cash flow valuation of the portfolio remains very appealing, and forecasts for aggregate growth remain good – revenue growth of +5%, operating profit growth of +8%, and double-digit earnings growth are forecast for 2026. We are confident that portfolio holdings can continue to compound free cash flow at a high and steady rate over coming years, whilst paying out an attractive level of shareholder returns along the way.
It is worth reiterating the repeat-purchase business models, the strong and clean balance sheets, and the self-funding characteristics that portfolio holdings possess. These are all qualities that the market has cared very little about over the last three years, but are likely to become more highly valued as credit conditions tighten, and investors search for diversification from what has become a very concentrated global market index.
The global stock market fell in October, as credit conditions tightened and doubts about the return on investment from AI capital expenditure hit US technology shares.
Evenlode Income rose +7.7% in the month, compared to a rise of +1.1% for the FTSE All-Share and +1.6% for the IA UK All Companies sector. Performance was broad-based, with the strongest contributors RELX, Experian, Sage Group and LSEG – whose share prices continued to recover from the first-quarter sell-off. RELX and LSEG reported good results, with full year guidance upgraded for LSEG. Another highlight was the performance of some of the recent new additions to the fund. Avon Technologies (+39%), Greggs (+14%) and XPS Pensions Group (+13%) all released positive updates in October. The only negative contributor of note was Games Workshop (-12%). Although full year guidance was reiterated in September, shares continued to fall back following a strong run.
We added two new positions to the portfolio in October – Fever-Tree and Volution.
Fever-Tree has experienced a significant valuation de-rating over recent years as UK growth slowed and cost-inflation impacted profitability in the post-Covid period. We think this has created an attractive entry point. Brand health remains strong, and the US opportunity, strengthened by its recent partnership with Molson Coors, is compelling – as are opportunities for broader global growth over coming years. Volution is a niche market leader, operating in the ventilation sector and underpinned by a range of structural growth drivers across its UK, Northern European and Australian markets. Management are strong capital allocators, and Volution has compounded earnings at an average rate of +12% over the last decade. Both Fever-Tree and Volution were added on a free cash flow yield of more than 6%.
We are a long way through the third quarter results season now, with more than 75% of the portfolio having updated the market. The free cash flow valuation of the portfolio remains very appealing, and forecasts for aggregate growth remain good – revenue growth of +5%, operating profit growth of +8%, and double-digit earnings growth are forecast for 2026. We are confident that portfolio holdings can continue to compound free cash flow at a high and steady rate over coming years, whilst paying out an attractive level of shareholder returns along the way.
It is worth reiterating the repeat-purchase business models, the strong and clean balance sheets, and the self-funding characteristics that portfolio holdings possess. These are all qualities that the market has cared very little about over the last three years, but are likely to become more highly valued as credit conditions tighten, and investors search for diversification from what has become a very concentrated global market index.