Report April 2022
During April, the Pareturn GVC Gaesco Columbus European MidCap Equity Fund class I fell by -1.22%. In the last twelve months the Fund has risen by 2.87% and by 22.06% in the last three years. Since its inception in June 2008, Columbus has returned 155.47%, comfortably outperforming European equity indices. The volatility in the last 12 months has been 13%.
Inflation remains at the highest level for the last four decades, with no evidence that it has yet peaked. The US Federal Reserve raised rates by 50 bp to 0.75% in the last meeting and could end the year above 2%. In Europe, the Central Bank changed its tune in March and opened the door to increases in interest rates in the second half of the year. Consequently, growth expectations for this year and next have been reduced while inflation forecasts have increased.
On the positive side, companies are posting better results than expected. In our meetings with companies, they confirm that sales and orders continue to be very strong, with inventories higher than normal, and that customers are accepting inflation- induced price increases. The short-term indicators related to services have improved in the first quarter of the year due to the lifting of travel restrictions, while those related to manufacturing have worsened due to the rising prices of raw materials and the disruptions in supply chains.
Several stocks in the fund have performed positively during the month, particularly those that benefit most from the normalisation of economic activity:
– Autogrill (+11.65% in the month), the Italian airport and highway restaurant company, controlled by the Benetton family, rose due to its potential merger with Dufry, the duty-free store company.
– Dalata Hotel (+10.6%), the Irish hotel company, announced that revenues per room continue to recover and in March and April exceeded 2019 figures.
– Getlink (+9.05%), the operator of the tunnel between the United Kingdom and France continues to is now at pre-pandemic levels of traffic.
On the other hand, industrial companies such as Interpump (-14.5%) have performed poorly given the market’s fear of rising raw material prices. It is worth noting, however, that in our conversations with the Italian company, they highlight the strong increase in orders and sales, and their confidence in maintaining margins. We believe that the recent price decline is an opportunity to buy a quality under-priced company.
Our portfolio continues to change and adapt to our expectations of the post-covid economic situation. In the Columbus Fund today, industrial and consumer stocks are prominent with a tilt to “economic normalisation stocks” — companies that were affected by the pandemic that are now returning to normal activity, such as tourism and leisure. We have not taken a position in companies related to the energy sector, which have performed well lately, since we do not have visibility on how energy prices will perform in the medium term. In late 2019, we had a sizeable position in stocks related to technology, software, renewable energy, and health (40% of the portfolio). In the intervening period, several of these holdings were sold for valuation reasons whilst some were taken over. Consequently, only 6% of the portfolio is invested in technology consulting businesses. We continue to maintain our renewables position in Neoen.
Value and growth are commonly used terms of distinction among equity investors who are often convinced of one approach or the other, however, we have a more pragmatic vision. We look for companies trading below our calculation of intrinsic value, but to hold these stocks for the long term we also look for significant potential for growth. In some cases, most of our expected return will come from revenue growth, and in other cases from a correction in the company’s undervaluation. By investing in a variety of opportunities, we are less exposed to changes in market sentiment, such as the one currently taking place.
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We thank you for your trust and wish the best to you and your families during these uncertain times.
Since June 14, 2018 both domestic and foreign investors have been able to access the Columbus strategy via the master-feeder structure between the Columbus 75 Sicav in Spain (feeder) and the Luxembourg registered Pareturn GVC Gaesco Columbus European Midcap Equity Fund (master). The Luxembourg vehicle offers both institutional and retail share classes.
