August Report

• Global share markets were weaker in August across most sectors and regions as the global economy continued to slow and inflationary pressures persisted
• US dollar strength and China’s sluggish economy brought a weaker Australian dollar, boosting returns in AUD terms
• The Portfolio returned 0.6% in August, while the benchmark returned 1.6%

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.com Inc

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.

Danaher Corp

United States

Health Care

Danaher Corporation designs, manufactures, and markets professional, medical, industrial and commercial products, and services in the sectors of test and measurement, environmental, life sciences, dental, and industrial technologies.

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.

Meta Platforms Inc

United States

Communication Services

Meta Platforms, Inc. operates as a social technology company. The Company builds applications and technologies that help people connect, find communities, and grow businesses. Meta Platform is also involved in advertisements, augmented, and virtual reality.

Rockwell Automation Inc

United States

Industrials

Rockwell Automation, Inc. produces industrial automation products. The Company offers products such as control systems, motor control devices, sensors, and industrial control panels. Rockwell Automation markets its products worldwide.

Schneider Electric SE

United States

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.

Thermo Fisher Scientific Inc

United States

Health Care

Thermo Fisher Scientific, Inc. manufactures scientific instruments, consumables, and chemicals. The Company offers analytical instruments, laboratory equipment, software, services, consumables, reagents, chemicals, and supplies to pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions, and government agencies.

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 

Global equity markets suffered a broad sell-off in August, as some of the gains of recent months were unwound. Signs of stubbornly high inflation brought concerns that global interest rates would be kept elevated for an extended period. This particularly impacted sentiment in the North American and European share markets.

Almost every region and sector made negative returns in local currency terms. The only exception was the energy sector, which outperformed after oil prices rebounded following production cuts by Saudi Arabia and Russia.

A faltering economy and continued weakness in its highly leveraged property sector pushed Chinese stocks lower. This weakened demand for materials and manufactured goods across global markets.

Technology and consumer stocks were generally weaker during August. However, the Portfolio’s holdings in businesses that are exposed to innovation in artificial intelligence (AI), such as Nvidia, Alphabet, and Amazon, continued to perform relatively well.

Portfolio Comment

Strong stock performance in information technology and the Portfolio’s overweight position in health care contributed to relative returns during August. This was offset by weak stock performance in financials and industrials. Strong stock performance in the US and Asia was offset by weakness in Europe.

Stocks in the financial sector were broadly weaker during August upon signs of a slowing economy and the possibility of higher interest rates. The Portfolio’s holdings in the sector detracted from relative returns in August.

This reflected underperformance by Netherlands-based digital payments processing company Adyen. Its share price fell sharply after the company announced disappointing half-year earnings results, which reported that growth in its US digital e-commerce business had slowed to 23%, half the level of last year. Furthermore, margins compressed as Adyen continued to aggressively hire engineers.

Many US e-commerce businesses opted for payment platforms provided by lower-priced – and lower-quality – competitors. These enterprises are focused on reducing costs to protect their own margins, which are coming under pressure as the economy slows. While these recent results were disappointing, the Portfolio believes that Adyen’s management is right to focus on investing for future growth despite near-term margin compression.

Adyen has built a seamless, global, end-to-end payments, data, and financial management platform, which it believes offers merchants superior functionality at the lowest total cost. Investing in technology and skilled employees to bolster its market-leading solutions in a period of industry weakness is expected to enhance the company’s prospects for long-term, profitable growth.

US-based electronic design automation (EDA) company Synopsys reported strong third-quarter earnings and raised its full-year earnings guidance. Robust chip design activity fuelled demand for its software which is used in microchip design and manufacture.

US-based global technology group Alphabet, which owns Google, continues to dominate the internet search market. It outperformed after demonstrating impressive generative AI capabilities through several key partnerships at its annual Cloud Next customer conference.