The second quarter of the year started with a bang and the Spring reporting season full of strong company results.
However, the latter two months of the quarter were remarkably dull as the FTSE 100 stayed range-bound in and around 7000 points. In contrast, the S&P 500 and DAX in Germany continued making all-time highs over the quarter.
Nevertheless, whilst the main domestic market remained dull that did not mean there was little to no action in the portfolio.
Bought: Genus and Kainos
Topped up: LSEG, BEZ, AUTO, TRN
Our Industrials have performed strong recently; in particular, Diploma, Halma and Spirax-Sarco Engineering. These UK listed names are all global leaders in their fields. Diploma and Spirax-Sarco were especially helped by the fact they operate across sectors, and are in the sweet spot of industrial recuperation as the economy recovers and ongoing healthcare demand.
Similarly enjoying these tailwinds, Halma boosted its dividend as it reported full-year profit growth, even though revenue edged down over the financial year.
In May, Diageo resumed their share buyback as recovery for the global drinks manufacturer gathers pace. The Guinness brewer and Johnnie Walker distiller saw good recovery across all regions, particularly in North America, whilst off-trade sales in Europe remained robust. With the business’s pricing power and customer/brand loyalty, Diageo should continue to outperform as the world gradually returns to ‘normality’. Roche, one of our international holdings, had a very strong quarter, with share price performance up 15% over the quarter on the back of strong phase III trial data for a drug combatting Alzheimer’s disease.
We added two new positions in June. One of the lagging sectors in the UK over the second quarter has been Technology and we took this opportunity to initiate a position in Kainos. Kainos is a leading, up-and-coming UK technology business, focusing on providing digital services to much of the UK government agencies and NHS. If you have recently renewed your passport or driving licence, you will have done so via Kainos developed and powered systems.
Secondly, we initiated a new position in Genus, a London listed mid-cap business focusing on animal genetics. Genus offers its customers access to best-in-class genetic winners, e.g. the highest yielding pigs and cows for farmers across the world. Genus was founded pre-WWII by the Milk Marketing Board, but was spun out in 1994. It is unique as the only truly scalable animal genetics business in the world, with most of its rivals much more home market focussed and lacking Genus’s R&D capacity.
We funded these acquisitions by selling our holding in Clinigen. Clinigen had performed exceptionally well for the fund in its five year stint in the portfolio. However, we sold the holding as the stock hit our target price, aiming to diversify into a more specialised animal healthcare (Genus) to complement our other remaining healthcare names (Roche, AstraZeneca, Smith & Nephew and Dechra).