Update on Echiquier World Equity Growth
Since 2010, Echiquier World Equity Growth has paired rigorous stock-picking with dynamic management. The fund invests in global growth engines, securities delivering high revenue growth and supported by long-term trends. In our opinion, with their pricing power and economies of scale, these companies have the innovation capacity to maintain their leadership position.
TRANSACTIONS
Economic outlook
The first nine months of 2022 brought a sharp global economic slowdown, very high inflation and restrictive action from central banks. Inflation was fuelled by supply chain tensions, the war in Ukraine, and the unprecedented monetary and fiscal expansion of the past two years. This has brought on a bearish phase for the markets, and in the process disposed of a good part of the speculative excess that had been going on. Within the portfolio, NIDEC and AMAZON were particularly hard hit by cost increases, while META continued to be impacted by the stricter confidentiality standards adopted by APPLE’s iOS. We sold off our position in META, since we have not seen the expected results of the methods used to remedy that situation. On the other hand, our Latin American stocks, ITAU UNIBANCO and CREDICORP, did see a rebound. These companies, which stand out thanks to their low valuations and cost management, have benefited as interest rates have risen. Moreover, ASTRAZENECA, a position we took in 2021, was also one of the top performers in the fund thanks to its low cyclicality and its growth in the field of cancer research. In fact, the fund has been refocusing all year on this type of defensive company with high pricing power¹, including KEURIG DR PEPPER, UNITEDHEALTH and DIAGEO.
Fundamentals
Over the past twelve months, the fund has sharply reduced its exposure to cyclical stocks. We also sold off our position in INDITEX in March 2022 because it has low pricing power and is overweight to the European market. Now, the fund’s exposure to the European economy remains limited. We have stayed away from Chinese securities, since the current economic and political uncertainty makes it impossible to properly assess the potential risk and reward of domestic companies. Among our main convictions, payment networks are showing resilient profiles in the current situation: inflation is mechanically increasing payment volumes while the digital payment trend continues.
INVESTMENT STRATEGY
Consisting of strong convictions, the fund remains concentrated on about twenty stocks. We are still convinced that our best ideas amount to our best long-term investment opportunities. That is why the fund is 55% composed of its top 10 weights. We remain focused on growth, leadership and innovation, in search of securities that we believe will be tomorrow’s structural winners. In the current economic environment, we prefer companies that combine resilience with pricing power.