SAP SE engages in the provision of enterprise application software and software-related services. It operates through the following segments: Applications, Technology, and Support; Qualtrics; and Services. The Applications, Technology, and Services segment includes sale of software licenses, support offerings, and cloud subscriptions. The Qualtrics segment sells experience management cloud solutions. The Services segment offers professional services, premium support services, implementation services for software products, and education services on the use of products. The company was founded by Hasso Plattner, Klaus Tschira, Claus Wellenreuther, Dietmar Hopp, and Hans-Werner Hector on April 1, 1972 and is headquartered in Walldorf, Germany.
COMMENTARY
Market Review
Equity markets declined broadly in March, with the US leading losses and most other major regions also closing the month lower. Growth stocks significantly underperformed value, creating one of the widest style dispersions in recent years and a particularly challenging backdrop for the Fund’s growth-oriented positioning. A weaker US dollar detracted from performance in Australian dollar terms.
Inflation trends remained broadly stable across major economies. In the US, price pressures showed signs of reacceleration, prompting investor caution around the potential delay in monetary easing. Economic activity improved modestly in parts of Europe and China, while signs of resilience in US consumer spending were tempered by a slower pace of growth.
In this environment, Axiom continues to favour dynamic growth businesses, particularly those with strong fundamentals and upward earnings revisions. As global growth moderates, the team believes market leadership will increasingly be driven by companies delivering consistent profitability and innovation rather than macro-driven cyclicality.
Portfolio Commentary
The Fund underperformed its benchmark in March, with relative weakness concentrated in growth-oriented sectors. Communication services, financials, and consumer discretionary were the largest detractors, and no sectors contributed positively.
Meta Platforms, a US-based digital advertising and social media company, declined on concerns that a softer economic backdrop could weigh on advertising budgets. ServiceNow, a US-based enterprise software provider, underperformed due to its exposure to the US federal government, which accounts for around 8% of revenues, and investor caution around public sector cost-cutting. Amazon detracted as investors reassessed data centre capital expenditure despite resilient consumer data.
Broadcom, a US-based semiconductor and infrastructure technology firm, contributed positively to relative returns due to the Fund’s lack of exposure, as the stock fell on concerns over slowing AI-related spending. Tesla also contributed positively through non-ownership following weaker-than-expected delivery figures. Cintas, a US-based uniforms and industrial services provider, outperformed on strong quarterly earnings and upgraded guidance.
The Fund reduced exposure to information technology and communication services while increasing allocations to financials and consumer staples. Existing positions in Cintas, Visa, and Sony were topped up. Visa was added for its defensive characteristics, while Sony’s weighting was increased following strong gaming results and optimism around the next Grand Theft Auto release. Nvidia, Netflix, and Alphabet were trimmed to lock in gains and manage portfolio risk amid softer consumer indicators.
Six new positions were established in March. Alibaba, a Chinese technology group, is seeing revenue and profit acceleration as its cloud business scales. Tokio Marine, a Japanese insurer, is gaining market share and offers upside in its specialty lines. Unilever, a global consumer goods company, is reshaping its portfolio to improve growth and margins. Primo Brands, a US bottled water business formed through a merger, is benefiting from health trends and cost synergies. JP Morgan is positioned to gain from increased market volatility. Deutsche Boerse, a European market infrastructure provider, is set to benefit from higher capital markets activity supported by fiscal stimulus.
No positions received MSCI ESG upgrades or downgrades during March. However, the team engaged with Boston Scientific’s chief sustainability officer to deepen their understanding of the firm’s ESG practices. ESG metrics now represent 15% of annual employee performance assessments, influencing compensation. The company has made strong progress on Scope 1 and 2 emissions and has committed to SBTi-aligned Scope 3 targets, working closely with its supply chain.