Global stock markets rose in September, recovering some of the ground lost in August. Corporate results continue to suggest the global economy is experiencing a slowdown, but sentiment was helped in part by hopes of a tariff deal between the US and China. Evenlode Income returned -0.2% compared to +2.7% for the IA UK All Companies sector and +3.0% for the FTSE All-Share.

The fund’s underperformance versus the UK market was primarily driven by strong performance from the energy and financial sectors, which Evenlode Income has zero and very little exposure to respectively. In terms of individual stock performance within the fund, some of the better performing holdings year-to-date pulled back, and some of the more unfashionable holdings rallied. The share prices of many of the more stable, reliable stocks (several of which we had been reducing over the summer for valuation reasons) retreated. These included Unilever, Relx and Diageo which were three of the most negative contributors to return over the month. Unilever and Relx fell on no specific news. Diageo released a trading statement reaffirming guidance for the year of +4-6% organic sales growth. The other negative contributor of note was Smiths Group, whose shares fell after releasing full year results. We found the results reassuring, and think management’s strategy of investing for the long-term and simplifying its portfolio of businesses is sensible. The most significant positive contributors to return were Schroders, Ashmore, Euromoney, Hays and Page Group. Schroders and Page Group rose on no specific news. Ashmore and Hays released final results, and Euromoney announced a strategic review of its asset management business.

In terms of portfolio changes we added to several stock for valuation reasons including Schroders, Bunzl, Spectris, Page Group, Hays, Sage Group, WPP, Reckitt and Unilever. We also trimmed several stocks, also for valuation reasons, including Compass, Smith & Nephew, Astrazeneca and Burberry.

Hugh Yarrow 30 Sep 2019
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