Strategic Growth Portfolio Update - Autumn 2018
Third quarter performance analysis for the St. James's Place Strategic Growth Portfolio.
The Strategic Growth Portfolio achieved a positive return over the period, aided by exposure to Japan and the US, and specifically to the industrial sector.
It was a significant period for Japan, as Shinzo Abe was elected for a third term as prime minister; Japan and the EU signed the largest bilateral trade deal in history; and the Nikkei 225 rose to its highest level since 1991. After disappointing growth being reported for the first quarter, second quarter growth came in at 3% (annualised).
The Japan fund, managed by Nippon Value Investors in Tokyo, benefited from exposure to the industrial sector. Kato Works, a manufacturer of cranes and other machinery, rose over the
period, as did Namura Shipbuilding, which benefited from signing new contracts. Moreover, a number of companies have been able to pass on recent inflationary rises to customers without adverse effect.
“Kyoei Steel and Yamato Kogyo, both of which are electric arc furnace steel makers, and Mitsubishi Steel, a specialty steel maker, have already started to pass on their increased cost base to their customers, increasing their prices,” said Yoshi Ito of Nippon Value. “They are able
to pass costs on because high demand for their products in the Japanese market means their customers are more worried about securing sufficient supply than about trying to lower procurement costs.”
As the effect of Donald Trump’s tax cuts continued to show up in corporate earnings, it was a particularly strong period for US stocks, and the S&P 500 struck yet another record high, clocking what was (by one measure) the longest bull run in its history. The North American and Global Growth funds were both significant contributors to Portfolio returns.
The North American fund gained from exposure to the consumer staples sector. The S&P 500 Consumer Staples index rose some 5% over the quarter, but stock selection was more important, since Walgreens-Boots Alliance, a significant holding in the Portfolio, rose by more than 20%. The company had suffered in June on news that Amazon was entering the prescription market but has since recovered as investors focus on fundamentals.
The Global Growth fund, co-managed by Sands Capital, Edgepoint, Magellan and Select Equity also benefited from US exposure. Thermo Fisher Scientific, a US biotechnology company held by Select Equity, performed strongly after announcing strong second quarter earnings. The fund also benefited from its exposure to the industrial sector.
You may also like to access the full Strategic Growth Portfolio Update.
The price of funds and the income from them may go down as well as up. You may get back less than the amount invested.
Portfolio fund allocations are not rebalanced automatically. Thus Client Portfolios may not include all of the stocks mentioned in the commentary, as fund allocations may vary between clients, leading to different investment experiences.
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.
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