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
Global equities rose in May, supported by strong earnings results, easing inflation, and resilient consumer spending in the US. Growth stocks meaningfully outperformed value, creating a favourable backdrop for the Fund’s positioning. The Fund’s currency hedge added value during the month, helping to preserve gains as the US dollar weakened relative to the Australian dollar.
In the US, inflation continued to trend lower while consumer demand remained firm, reinforcing the soft-landing narrative. Europe presented a mixed picture, with business surveys softening slightly but still pointing to modest growth. Retail activity improved marginally, though underlying momentum remained fragile. Commodity prices also declined, helping to maintain supportive financial conditions.
China’s economic signals were mixed. While some indicators improved, manufacturing activity slipped back into contraction, and consumer demand remained sluggish, held back by ongoing weakness in the property sector. Stimulus efforts are beginning to gain traction, but the recovery remains uneven.
Axiom believes the current market continues to favour companies delivering strong earnings momentum, particularly those exposed to secular growth drivers. As macro conditions remain uneven, the team is focused on businesses with clear visibility into earnings upgrades, rather than those reliant on cyclical tailwinds or broad economic strength.
Portfolio Commentary
The Fund outperformed its benchmark in May, supported by strong stock selection in health care, communication services, and consumer staples. These sector exposures added meaningfully to relative returns, while consumer discretionary and information technology holdings modestly detracted.
Axon Enterprises, a US-based provider of public safety technologies, was a top contributor after delivering strong first-quarter results, led by software and services. The company also eased investor concerns about federal budget exposure, supporting a re-rating. Meta Platforms outperformed following strong earnings, robust advertising growth, and continued improvements in return on ad spend through AI-driven enhancements. Taiwan Semiconductor Manufacturing Co, the world’s leading advanced chip foundry, contributed positively after reporting April sales that exceeded seasonal norms and market expectations.
On the downside, Alibaba, a Chinese e-commerce and cloud services group, underperformed after slightly disappointing results in cloud and local services. Axiom remains constructive on its medium-term potential, supported by improving fundamentals. Broadcom, a global semiconductor and software company, detracted from relative returns due to the Fund’s lack of exposure. Nvidia also weighed on performance due to the underweight position amid a strong rally in semiconductors following an upside surprise in hyperscaler capital expenditure.
Several portfolio changes were made during the month. The Fund added to Microsoft, Meta, and Amazon following strong results and guidance that suggest upside to consensus forecasts. New positions were established in Siemens Energy, a German energy technology company with improving fundamentals, and Heico, a US-based aerospace and electronics firm with a scalable aftermarket model. The Fund exited Danaher, a life sciences and diagnostics business, and Deckers, a footwear company, following weaker-than-expected guidance. Apple, TJX, and Sony were trimmed on earnings-related signals, though the team remains constructive on their long-term outlooks.
Three holdings received ESG upgrades. Boston Scientific, a US-based medical device company, MercadoLibre, a Latin American e-commerce and fintech platform, and Tradeweb, a global operator of electronic trading platforms, were recognised for governance improvements. Nvidia and Costco were modestly downgraded. Axiom views these changes as incremental and is engaging with management. ESG discussions with Morgan Stanley and Deutsche Boerse, a European market infrastructure provider, highlighted continued progress on sustainability and human capital initiatives.