Performance Update
Despite the sharp falls in the market so far in March, the portfolio performance has been resilient vs benchmark .
Some might think that with a higher Beta, a fund like Robotech would underperform in market conditions like this. However, so far it has been reasonably resilient, and like in other periods of historical volatility (Q1 2016, Q4 2018), our portfolio breadth has helped provide some stability.
In the current turbulent period, we have found some relative support which we mainly attribute to two factors:
- Quality companies with strong balance sheets.
The portfolio holdings typically have little debt, and many have significant cash on their balance sheets. As of February 2020, the AXA WF Framlington Robotech fund features a Net Debt/Equity of 0.7%, vs. the MSCI AC World which leverage at 48.3%. This number reflects the ability of the companies in our fund to better manage in in a business slowdown like currently, leaving them in a better position than companies that are burdened with a lot of debt. - Market Cap Diversifications.
We have seen some resilience from Mega Cap Technologies companies as investors have favoured strong and stable companies. As such, investment like Amazon may even ultimately benefit as more people shop online. Kiva robots in their warehouses are working at full speed while we expect an increasing number of people using Alexa‘s smart home application to make their shopping list at home. Similarly in the UK, we have seen delivery slots for Ocado’s online grocery offering get taken very quickly.
PORTFOLIO CHANGES
We have made no major changes to the fund over the last couple of weeks as we assess the evolving impact on the companies we invest in. Worth mentioning that we have selectively topped up positions impacted by the recent volatility, this includes some healthcare names that have been particularly hit as elective procedures like robotic surgery for spinal issues get deferred as other potential COVID related issues are prioritized. Importantly, these deferrals are not cancellations (the patients will still need surgery in due course) so the recovery will likely be substantial when conditions normalise again in the coming months. With our longer term investment horizon, we have started to increase some positions here in companies that we feel at starting to trade at substantial discounts to what we believe their earnings potential is in normalised economic conditions.
CURRENT THOUGHTS & OUTLOOK
Looking at current valuations, we seen many companies now that screen attractive when we consider their long-term earnings profile.
As such we continue to monitor closely the situation and are beginning to opportunistically add to names that we feel have been overly punished, whilst recognising the need for caution and not acting with too much haste.
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