Warning: members of the public are being contacted by people claiming to work for AXA Investment Managers UK Limited.  Find out more information and what to do by clicking here.

Investment Institute
Technology

Global Thematics strategy: Our companies with strong balance sheets and good cashflow conversion continue to outperform

  • 07 September 2020 (10 min read)

Key points

  • Global equity markets performed well during August
  • Contribution to positive performance let by ‘Connected Consumer’ theme
  • We reinvested in a number of existing holdings across multiple themes

What’s happening?

Global equity markets performed well during August, supported by second quarter corporate earnings which have largely beaten expectations and, in some cases, have allowed management teams to articulate improved visibility for the second half of the year. Growth continued to outperform value in all major markets, and those businesses with strong balance sheets and good cashflow conversion continue to outperform.

Whilst progress towards potential COVID treatments and vaccines has been made at an extraordinary pace, we are still some way from a scalable solution. In the meantime, parts of Western Europe and Asia have seen recent spikes and the risk of further restrictions remains real.
Macroeconomic data has been broadly positive, as developed market economies continue to re-open and PMI1  gains continue, albeit at a more moderate pace than in the prior month. Strengthening export orders from Taiwan and South Korea are indicative of a gradual recovery in global CAPEX2 . Whilst macroeconomic conditions remain weak, the sequential improvement is positive and suggest that conditions are improving – a message underlined by many corporates.

We remain convinced that the disruption caused by COVID 19 has accelerated existing secular trends, improving the long term outlook for a number of themes within the Evolving Economy, with the drivers of all five themes remaining intact.

Portfolio positioning and performance

The strategy performed well in August, led by our ‘Connected Consumer’ theme, and with positive performance also coming from ‘Automation’, ‘Clean Tech’ and ‘Transitioning Societies’. In ‘Connected Consumer’, strength was broad based and included a contribution from Apple, Adobe Inc and ServiceNow. Apple performed well following strong earnings and growing confidence in the 5G cycle as a driver of smartphone sales. Adobe Inc continues to benefit from the shift toward working from home. Service Now responded well to solid quarterly earnings and increased full year guidance as the business benefits from an increased commitment by corporates to the digital transformation.

In ‘Automation’, Trimble and Qualcomm both contributed positively. In ‘Clean Tech’, Kingspan outperformed following earnings which beat expectations and supportive European policy decisions regarding renovation of the existing building stock. In ‘Transitioning Societies’, Alibaba performed well following strong quarterly earnings which demonstrated the ongoing recovery of the Chinese consumer.
We made limited changes to the portfolio during August adding to our existing holdings.

Outlook

Macroeconomic conditions in major markets appear to be improving and monetary and fiscal support remain in place. Gradual normalisation is improving visibility for corporates, supporting a recovery in investment which appears increasingly focused in areas within the Global Thematics.

We retain the view that high quality management teams, operating businesses with a sustainable competitive advantage in their markets and with the benefit of secular tailwinds are well placed to navigate the current disruption. The portfolio is therefore well positioned to benefit from the secular shifts we are witnessing globally.

No assurance can be given that the Global Thematics Strategy will be successful. Investors can lose some or all of their capital invested. The Global Thematics strategy is subject to risks including Equity; Emerging markets; Currency; Global investments; Investments in small and/or micro capitalisation universe; ESG.

  • UHVyY2hhc2luZyBNYW5hZ2VycycgSW5kZXg=
  • Q2FwaXRhbCBleHBlbmRpdHVyZXM=

Have our latest insights delivered straight to your inbox

SUBSCRIBE NOW
Subscribe to updates.

    Not for Retail distribution

    This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date.

    All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document. Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.

    Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales, No: 01431068. Registered Office: 22 Bishopsgate, London, EC2N 4BQ. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

    Risk Warning

    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.