Why Tesco will do best after Brexit

TL;DR

In 2018, equity and bond markets experienced drawdowns, but a portfolio focused on strong businesses and defensive positions can bring stability in the face of low returns and high volatility.

Transcript

yeah so 2018 was a very difficult year um what we saw was that Equity markets and bond markets both suffered quite a substantial draw down in Q4 um so we were very pleased we delivered a flat return in 2018 um and the key drivers of that return actually as per usual in our in our portfolio in the latitude Horizon fund were the single stocks so it w... Read More

Key Insights

• 🫓 Single stocks were the primary drivers of the Latitude Horizon fund's flat return in 2018.
• 💪 The portfolio has a strong emphasis on China exposure, believing in its long-term prospects.
• ❓ Consumer experiences and the resilience of the US banking system are significant themes in the portfolio.
• 😘 The fund manager expects low returns and high volatility in the current market environment.
• 💪 Defensive positioning with a focus on strong businesses is recommended amidst uncertain market conditions.
• 🧘 Timing markets is unreliable, so investors should concentrate on risk levels suitable to their savings and retirement positions.
• 💱 Currency hedging is used to mitigate potential risks, such as the volatility caused by Brexit.

Questions & Answers

Q: What were the key drivers of the Latitude Horizon fund's flat return in 2018?

The main contributors to the fund's performance were single stocks, such as Starbucks, Visa, Shisedo, and Advanced Auto, which generated compounding returns and did not derate as much as the overall market.

Q: How does the fund approach China exposure?

The portfolio includes developed market equities with significant sales and profits from China, such as Starbucks, Shisedo, and Uni. Despite growing nervousness about China, the fund believes in its long-term prospects.

Q: What are some key themes in the portfolio?

Apart from China exposure, the fund focuses on consumer experiences, favoring companies like Starbucks. Additionally, it sees the US banking system as more resilient post-regulation and post-financial crisis, with Bank of America and Goldman Sachs in the portfolio.

Q: What is the fund manager's view on market conditions and future returns?

Ten years after the financial crisis, the fund manager expects low returns and high volatility in both equities and government bonds. It advises against reaching for risk and suggests a defensively positioned portfolio concentrating on strong, compounding businesses.

Summary & Key Takeaways

• Despite a difficult year, the Latitude Horizon fund delivered a flat return in 2018, with single stocks like Starbucks, Visa, and Shisedo performing well.

• The portfolio has a focus on China exposure, believing in the long-term prospects of the Chinese market.

• Consumer experiences and the resilience of the US banking system are additional key themes in the portfolio.