Equity markets ended the month in the red, with MSCI World down 8.3%, MSCI Emerging Markets down 5.6% and Stoxx 600 Index down -5.4%. A recap of what’s been happening in the equities market during April- the start of earnings season, ongoing war in Ukraine, the expectations of the Fed hiking rates faster, continued supply chain disruptions and the impact of Covid lockdowns in China.
*All returns are in USD

The best performers in the fund for the month were Alexandria Real Estate (2.35%); Cincinnati Financial (1.55%) and Charter Communication (2.24%). Alexandria is a REIT that focuses on technology, agtech and life science entities. The REIT issued their quarterly results around the end of the month. Total revenue for Q1 was up 28.2% to $615.1m and net operating income on a cash basis was up 25% to $301.3m annualized. The company does not have any debt maturing before 2025 so far and the weighted average of the remaining debt as of 31 March 2022. Cincinnati Financial share price has been performing well throughout the year due to the market expecting rates to increase. Charter Communication’s released their Q1 results and beat market expectations. Total revenue was up 5.4% to $13.2bn because of growth in their residential, mobile, and commercial segments. Due to growth in revenue, adjusted EBITDA grew by 5.4% to $5.2bn and this resulted in net income increasing by 49% to $1.2bn- the previous comparable quarter they recorded non-recurring litigation charges which they didn’t record during the reporting period. The cable company saw a slight decline in free cash flow to $1.8bn from $1.9bn due to a payment related to the legal settlement.

The worst performer for the fund has been Nvidia, ASML and Edwards Lifescience. Nvidia is only reporting their quarterly results end of May, but the market seems to be nervous about what to expect from the company. Their competitors have given bullish commentary on current demand trends in the semiconductor industry, but the market is concerned about the macroeconomic headwinds in the industry, and this has resulted in the decline of the company’s stock. There hasn’t been any company specific news so far this month, but higher inflation and interest rates can potentially impact the gaming market and data centers, which are their biggest revenue contributors. ASML reported their Q1 numbers and performed well, with management discussing the unpreceded robust demand they are seeing in the industry for both mature and advanced nodes. Net sales were down 19% to €3.5bn year-on-year but this comparison is misleading because the company recently changed their revenue recognition policy. Essentially, they’ll only recognize revenue from sales after final testing occurs at customer’s sites, whereas previously this occurred at ASML’s factory sites. So based off how they would historically recognize revenue, the company would have recorded revenue growth of 23% year-on-year. The important number to look at would be their orders numbers, which grew by 47% to €7bn.

Edwards Lifescience released their Q1 results and during the earning’s call management spoke of pressures that U.S. hospitals are currently under such as labour shortages and higher costs; and that they haven’t fully recovered from the pandemic. Despite the current challenges the MedTech company is experiencing, the company performed well with total revenue growing by 10% to $1.3bn during the quarter. While operating income grew by 14% to $445m and net income was up 11% to $378m. Revenue growth was boosted by TAVR segment (largest revenue contributor) which recorded a 14% increase in sales due to product adoption growth. One of their competitor’s products got recalled just before Edward’s earnings call and this creates a small opportunity for the company, albeit that the opportunity won’t be as big as the overall TAVR market. Management warned that Q2 numbers will have lower underlying growth due to tougher year-on-year comparisons but made it clear that in absolute terms, the numbers will be high. Overall, management’s commentary about current headwinds may have left a bitter taste in the market’s mouth, however, the market does seem to be overreacting.

The market is very sensitive to bad news and any uncertainty brings about volatility which is what we’re experiencing. Due to the current macroeconomic risks, we’ve kept our equity exposure at approximately 45% so that the fund does not take on undue risk. But we will remain focused on the long-term strategy and look for entrance points in stocks we have in our watchlist.