Overstone Global Equity Fund
A focussed global equity strategy with a classic, contrarian value approach to building long-term value.
Investment objective
The Fund will attempt to achieve over the long term a total return in excess of that of the MSCI World Index (with net dividends reinvested) through investment in a concentrated portfolio of equities of predominantly large companies, selected from all the major markets and to a lesser extent from some emerging markets, worldwide. The approach is classic contrarian value, based on bottom-up fundamental research of individual companies. The average market capitalisation of companies represented within the Fund is likely to be more than US$20 billion.
Fund particulars
| Launch date | 01 June 2005 |
|---|---|
| Fund size | US$663.4m |
| Domicile | Ireland |
| Structure | QIAIF |
| Base currency | USD |
| Dealing | Daily |
| Min. investment | €100,000 |
| Benchmark | MSCI World |
Portfolio managers
Andrew Goodwin
Nigel Waller
Andrew Goodwin
Andrew joined OP in March 2013. He had previously been employed by SVG Capital in London for seven years managing mainly European equity portfolios. Before joining SVG, he held portfolio management positions at Sovereign Asset Management, American Express Asset Management and Phillips & Drew Fund Management. He graduated from Cambridge University. He co-manages the global and EAFE equity portfolios and contributes to the overall investment selection.
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Nigel Waller
Nigel is one of the founding partners of OP. He was previously at MLIM for 13 years. He was a director and portfolio manager on the global team. At MLIM he was also a member of the emerging markets and European teams in London and, from 1997 to 1999, the Asia team in Singapore. He graduated from City University. He is Chief Investment Officer and Chief Executive. He co-manages the global and EAFE equity portfolios and contributes to the overall investment selection.
Latest publications
Latest publications
Global Equities Strategy
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Commentary
The largest positive contributors to the portfolio, in order of their impact on the portfolio’s total return relative to the benchmark, were Lloyds Bank (+10%, total return in local currency), BT (+6%), Toyota (+12%), Fresenius (+10%) and Barrick Gold (+10%).
Trying to predict quarterly profits for a UK bank has never been a simple task but it is now harder than ever. Last year’s COVID-19 shock prompted Lloyds Bank and almost all those in the developed world to provision heavily for possible loan losses stemming from economic downturn associated with the pandemic. In 2020, Lloyds provisioned £4.2bn in potential losses. With the vaccine programme in the UK going well the outlook is looking a little brighter and the bank’s first quarter results for 2021 reported at the very end of April included a writeback of a net £320m in loan loss provisions. This writeback and a pick-up in business and bond yields meant that profits reported for the quarter were much better than consensus expectation. As a result, consensus expectation for profits in 2021 has risen by circa 30% during May, helping to drive the share price higher. Mortgage activity is picking up smartly as consumers emerge from lockdown in search of a new home (with a garden!) and credit card balances will rise once more as spending recovers and economies recover. The suspension of buybacks and dividends and the boon in profits this year raises the issue of excess capital and the prospect of the resumption of buybacks accompanying the phased return of dividends. At today’s valuation of 0.9 times tangible book and price to forward earnings ratios of 8.5 times, we think the shares offer another 30% upside over the next couple of years.
Toyota’s shares were strong performers during the month after the company announced their latest financial results. They surprised many with their view that their production schedule would not be affected by the worldwide shortage of automotive semiconductors that has been the cause for large production curtailments at all their leading competitors. At the same briefing, the company updated investors on their outlook for electrification of their products over the next decade. Toyota doubled their targets for sales of pure electric vehicles, those powered by batteries or fuel cells, by 2030. The problem is that this is to just two million vehicles which represents only 21% of their total volume in 2030, a percentage only half the level of Honda and Ford, just over 40% of VW’s target and about a quarter of GM’s. Toyota believes strongly that hybrid electric vehicles, where they are world leaders, will remain in demand long after their competitors have transitioned to battery electric vehicles because developing markets especially will struggle to set the electricity infrastructure in place. The company may be right on this but we are currently reviewing our fair value given the recent strong performance in the shares.
Commentary
The largest negative contributors, in order of their impact on the portfolio’s relative return, were Siemens (-4%, total return in local currency), Bayer (-4%), Kansai Electric Power (-4%), Samsung Electronics (-1%) and Hewlett Packard Enterprise (-0%).
Siemens released its second quarter results at the beginning of the month. They beat all expectations but still the shares slipped a little having been very strong this year proving that it is often better to travel than to arrive. Siemens’ shares have been a great investment since we began building the position in October 2018. We had spent much of 2018 considering an investment in GE but it only looked attractive on one valuation metric and we didn’t like the financial leverage, the accounting or the complexity of GE Financial Services. We opted for Siemens that also had a collection of very interesting businesses that looked cheap but this time on all metrics and where investment sentiment was poor because of the collapse in its gas turbine business that we thought was more than in the price. Siemens Financial Services is a simple beast with low leverage for a finance company. Since the date of our first purchase, the shares have provided a total return of 73% in US dollar terms to the end of the month against 52% for MSCI World and only 16% for GE.
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Commentary
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Commentary