Oil, commodity and defence stocks led the market, in a period where headlines (and social media posts) surrounding war in the Middle East were the primary driver of stock moves.

While Esk does not hold any oil majors, the Fund’s mining (Rio Tinto) and materials (Shin-Etsu Chemical) holdings were our top performers over the quarter. We took the opportunity of shares in Shin-Etsu, the Japanese chemicals business, approaching record highs to take profits on our holding during March and with Rio Tinto shares now approaching similar highs, will likely look to do the same here. While both businesses are clear leaders in their markets (e.g. Rio Tinto’s iron ore mines in Western Australia are the largest in the world), commodity prices are not a one-way positive bet.

Another beneficiary of geopolitical tension has been our holding in Euronext, the European stock exchange operator. Global investors are seeking to diversify their exposure away from unpredictable US policymaking and European markets have been a beneficiary, with increasing trading volumes coming the way of Euronext. So long as a certain president remains in the Oval Office, we see this trend continuing.

We took the opportunity of market volatility to further diversify Esk, adding four new blue-chip names to the portfolio that we have long admired. Netflix shares fell a remarkable 43% from June 2025 to February 2026 as investors worried that their bid for Warner Brothers would derail the business. We did not think that this would be the case and initiated a position around the lows of 2026. News that Netflix walked away from the bid with their heads held high was taken well and shares have since rallied. We also began to build positions in semiconductor giants Nvidia and Broadcom after shares in both businesses have essentially moved sideways for three quarters since their remarkable positive runs before then. Both businesses have continued to grow at remarkable rates, thus their valuations have caught up and now appear to us far more reasonable.

Our final new investment of the quarter was in the Chinese gaming and social media leader Tencent. Tencent’s scale is remarkable, for example their Weixin messaging platform has 1.4 billion monthly users in China and seven of the top ten mobile games downloaded in China last quarter were Tencent owned. Tencent shares are currently trading on their lowest rating for many years on the back of concerns that they are behind in the AI progress. We do not think that this is the case and believe that their unrivalled scale and ongoing high cash generation puts them in a strong position to survive and thrive in a world of AI. Now looks like an attractive entry point.

Regular readers will note the LVMH has moved out of our top ten positions as the whole luxury sector has come under pressure this year. With missiles flying around the Middle East in multiple directions, of course this crucial end market for luxury goods will not be spending at previous rates, and this has also been reflected in the share price of our Ferrari and Hermès investments. We continue to view all three companies as owning unique brands that have stood the test of time through multiple wars but admit that their near-term outlook is difficult. We will continue to monitor the positions closely and must be vigilant if we do see long-term signs of weakness.
 

The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note that the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.