Monthly Report - May

• Relatively flat returns in May belied the volatility during the month
• The style-headwinds experienced by high-quality, fast-growing companies continued unabated through May
• Amid strong style-headwinds and economic uncertainty, we continue to find opportunities to add to our ownership of high-quality, growing businesses whose current share prices fail to reflect their underlying value.

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Top Holdings (alphabetically)

Alphabet Inc

United States

Communication Services

Alphabet Inc. operates as a holding company. The Company, through its subsidiaries, provides web-based search, advertisements, maps, software applications, mobile operating systems, consumer content, enterprise solutions, commerce, and hardware products.

Amazon

United States

Consumer Discretionary

Amazon.com, Inc. is an online retailer that offers a wide range of products. The Company products include books, music, computers, electronics and numerous other products. Amazon offers personalized shopping services, Web-based credit card payment, and direct shipping to customers. Amazon also operates a cloud platform offering services globally.

AMETEK Inc

United States

Industrials

AMETEK, Inc. is a global manufacturer of electronic instruments and electromechanical devices. The Company manufactures advanced instruments for process, aerospace, power, and industrial markets and is a supplier of electrical interconnects, specialty metals, technical motors and systems, and floor care and specialty motors.

Deere & Co

United States

Industrials

Deere & Company manufactures and distributes a range of agricultural, construction, forestry, and commercial and consumer equipment. The Company supplies replacement parts for its own products and for those of other manufacturers. Deere also provides product and parts financing services. Deere and Company extends its services and products worldwide.

First Republic Bank

United States

Financials

First Republic Bank and its subsidiaries provide private banking, private business banking and private wealth management in urban, coastal markets in the U.S. First Republic delivers relationship-based service by providing a single point of contact for all of its services.

Microsoft

United States

Information Technology

Microsoft Corporation develops, manufactures, licenses, sells, and supports software products. The Company offers operating system software, server application software, business and consumer applications software, software development tools, and Internet and intranet software. Microsoft also develops video game consoles and digital music entertainment devices.

Schneider Electric SE

France

Industrials

Schneider Electric SE manufactures electrical power products. The Company offers car chargers, home security goods, light switches, access control, sensors, valves, circuit breakers, cables, accessories, signaling devices, fuse, motor starters, and voltage transformers. Schneider Electric serves customers worldwide.

SVB Financial Group

United States

Financials

SVB Financial Group is the holding company for Silicon Valley Bank. The Bank is a commercial bank that serves emerging growth and middle-market growth companies in targeted niches, focusing on the technology and life sciences industries. Silicon Valley operates offices throughout the Silicon Valley and other areas of California, as well as in other states.

UnitedHealth Group Inc

United States

Health Care

UnitedHealth Group Incorporated owns and manages organized health systems. The Company provides employers products and resources to plan and administer employee benefit programs. UnitedHealth serves customers in the United States.

Vertex Pharmaceuticals Inc

United States

Health Care

Vertex Pharmaceuticals Incorporated discovers, develops, and commercializes pharmaceutical products. The Company develops drugs for the treatment of cystic fibrosis, cancer, inflammatory bowel, autoimmune disease, and neurological disorders. Vertex Pharmaceuticals serves healthcare sector worldwide.

Market Review
Relatively flat returns in May belied the volatility during the month as investors wrestled with the implications of sustained inflation and the inevitable response by central bankers, including the US Federal Reserve increasing rates by 50 basis points. US retailers Target and Wal-Mart spooked markets with warnings of weaker consumer spending, fuelling speculation about a looming recession. In China, the extent to which the country’s Zero-COVID policy and extensive lockdowns have hurt the economy became more apparent, although government reopening efforts and planned stimulus led to optimism toward the end of the month.

Attribution
The style headwinds experienced by high-quality, fast-growing companies continued unabated through May. On a year-to-date basis, value companies (represented by the least expensive quintile) have outperformed the most expensive quintile by over 2,800 bps. The severity of these style headwinds has contributed to portfolio underperformance across all major sectors and regions.

Significant stock declines during May from:

• Rockwell Automation which reported disappointing earnings due to supply chain constraints that prevented fulfillment if its growing order book; and
• Illumina in the health care sector which experienced a sharp decline in share price after a Delaware jury ordered the company to pay more than $333 million in damages after ruling that the company’s DNA-sequencing systems infringed upon two patents of Chinese genomics rival BGI.
• The portfolio’s underweight in Consumer Staples contributed to relative returns as worries about consumer spending weighed on the sector.

Portfolio Comment
Amid strong style headwinds and economic uncertainty, we continue to find opportunities to add to our ownership of high-quality, growing businesses whose share prices fail to reflect their underlying value. One is Schneider Electric, a French electrical component specialist. Schneider helps its industrial and other commercial customers capture real-time data, with a focus on measuring and evaluating electricity consumption to identify and implement energy efficiencies to save money and lower carbon emissions. While Schneider is not immune to economic cycles, we expect rising energy prices and demand for energy efficiency projects will lead to sustained growth over the long run. We’ve added to our holding in the company several times this year, most recently in May.