Monthly Report June 2021

Stock market Mostly better

Performance Underperformance

Investments Invested

Outlook Higher

Markets

After Mao's death, the leadership around Deng Xiaoping focused on economic reforms without relinquishing political power. Sooner or later, the party will have to give up its absolute claim to power. Many Chinese today are well educated and have achieved a certain level of prosperity. They want to have a say when a road is built on their doorstep. These everyday conflicts are increasing. In the long run, this will become a problem for the party. Whether the regime collapses because of this is another question. Either way, China will probably not become a democracy. It lacks the democratic tradition that Europe has had since ancient Greece. When China changes, it orients itself to its own traditions. Perhaps it will return to the successful model of the early Qing period (17th century): a lean state, authoritarian leadership, and a foreign policy focused on trade and border security. Xi Jinping is working on China's renaissance as a world power. He considers references to human rights to be empty talk. China has lifted hundreds of millions of people out of poverty. This is the greatest humanitarian action in world history. There is no chance of China being isolated by Western countries. The country is too big, too rich and too powerful for that. So the only option is cooperation, but this must be based on reciprocity. What Chinese companies are allowed to do in Western countries, Western companies must also be allowed to do in China. The West should be more self-confident in its dealings with China. People tend to overestimate China because it has been so successful recently.

Performance

In a friendly market environment, the Net Asset Value of Formulafirst Ltd. slid marginally by 1.01% in June. The MSCI Europe increased by 1.56%. The resulting underperformance of Formulafirst Ltd. compared to the MSCI Europe is 2.57 percentage points for the month of June 2021. Since the beginning of 2021, an underperformance of 6.60 percentage points has resulted.

Investments

In Q1 2021, Henkel divested two brands in Beauty Care with total annual sales of EUR 20 million. In addition, two further agreements were reached to divest a) a laundry detergent brand in Europe and b) an adhesives business with total sales of approximately EUR 40 million p.a. An additional transaction concluded in the adhesives business involves the sale of a smaller business with annual sales of approximately EUR 35 million. Henkel aims to have realized the reduction of EUR 500 million in sales by the end of 2021 as announced. So far, no slowdown is visible in the adhesives business. Demand is strong across all industrial sectors. Wacker Chemie has raised its full-year guidance for sales and EBITDA due to the good business development in Q1 and the current business trend. The company aims to increase sales by a low double-digit percentage in 2021 (previously: mid-single-digit percentage). EBITDA will grow by 15-25% (previously 10-20%). Continued high demand in almost all product areas and the positive development of polysilicon prices are the reasons for the higher expectations. In the polysilicon segment, Wacker Chemie's customers want to sign longer-term purchase agreements. This shows that demand exceeds supply.

Outlook

As the strong economic recovery should continue into 2022 and the Fed continuing to stand pat, the "reflation trade" should dominate, along with rising commodity and equity prices. Vaccination activity in Europe has caught up and Covid-19 cases are falling rapidly. This will lead to an accelerated economic recovery in Europe. Therefore, the growth focus may shift from the U.S. to the Eurozone. This argues for exposure to Eurozone assets. All the more so as an acceleration of growth in the Eurozone strengthens the pro-cyclical Euro currency.

Performance as of June 30, 2021

Net Asset

June

Since

Value

2021

2021

3 years

inception

CHF 34.24

-1.01%

7.00%

3.44%

5.28% p.a.

Share price development as of June 30, 2021 (indexed)

180

160

140

120

100

90

80

70

60

50

40

35

Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19 Jan 20 Jan 21

Formulafirst (CHF) MSCI Europe Index (EUR) SO Index (EUR)

Breakdown by sectors

Materials

29.4%

Healthcare

25.7%

Industrials

16.1%

Consumer discretionaries

10.8%

IT

7.9%

Consumer staples

4.7%

FX

0.3%

Cash

5.1%

Country Breakdown

Germany 52.7%

Switzerland 47.3%

The largest positions

Swatch Group AG 10.8%

SGS SA 8.3%

Wacker Chemie AG 8.1%

SAP SE 7.9%

Forbo Holding AG 7.9%

Dürr AG 7.8%

This information is not an offer to purchase or subscribe to shares in Formulafirst and may not be circulated in any jurisdictions where it violates any applicable laws or regulations, including and without restriction in the United States of America. While the information given is considered reliable, Formulafirst, respectively 2trade group ltd. don't guarantee that it is complete or accurate. Opinions and estimates may be amended without notice. Past performance is not an indication of future performance.

Formulafirst - investing in "smart owners"

Formulafirst: the concept

Investment idea

Experience shows that owners generally invest more successfully than em- ployees. The Investment company Formulafirst focuses on Smart Owners as they are known. The investment universe consists of owner-managed companies in Central Europe (D-A-CH).

Owner-managed companies and those that are controlled by owner-oriented groups of investors are generally distinguished by their consistent strategy of long-term and sustainable growth. Since owner-managers have a substantial share of their wealth and, in most cases, of their working time invested in the company, their strategic business orientation includes goals such as maintaining the company's independence, a smooth transfer to the next generation as well as safeguarding and growing the company's assets. The long-term perspective, in some cases spanning several generations, is a major reason why these companies are more focused on their long-term strategic positioning rather than on the short-term maximization of returns.

Investment criteria

For owner-managed companies to be included in the investment universe of Formulafirst, the following conditions must be met: a) headquarters in Central Europe (Switzerland, Austria and Germany), b) listed on an regular stock exchange, c) minimum market capitalization of EUR 100 million, d) managed by owner-managers holding at least 15% but no more than 75% of voting rights. The universe of owner-managed companies from which the best stocks are picked by Formulafirst for investment includes the 50 such companies with the highest market capitalization.

The companies selected form the basis for Formulafirst's investments.

Investment strategy

Made up of the 50 owner-managed companies the investment universe is screened by a thorough fundamental analysis in a primarily "bottom-up" approach and the most promising stocks are identified.

Formulafirst invests in equities convertible instruments, options (manag- ing existing positions), futures (to hedge currency and market risks) and shares of holding companies and funds. Investment exposure is 100% of company assets. The investment horizon is long-term and the selection of portfolio positions is limited to a reasonable number. The size of individual investments may not ­exceed 10% of the portfolio when purchased (cost). The investment style is primarily based on the "value" approach and investments are made in an anti-cyclical manner. The maximum sector weighting in the portfolio should not exceed 30%.

NAV and performance calculation

The Net Asset Value (NAV) of the Company is equal to the total assets less total liabilities of the Company (determined on the basis of International Financial Reporting Standards, consistently applied). The NAV per share is calculated by dividing the NAV by the amount of outstanding shares of the Company on the calculation day of the NAV. The monthly, year-to-date as well as the 3 year performance are calculated by dividing the actual NAV per share by the NAV per share a month ago (CHF 34.59), at the previous year end (CHF 32.00) respectively 3 years ago (CHF 33.10). The performance since inception (18 December 2002) reflects the annualized yield since 18 December 2002 till today, using a start NAV of CHF 13.-.

Smart Owners consistently outperform the market (indexed)

30.6.2021

700

600

500

400

300

200

100

80

70

60

50 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2017 2018 2019 2020 2021

Smart Owners Index (EUR) MSCI Europe Index (EUR)

Company details

Company:

Formulafirst Ltd., British Virgin Islands

Board of Directors:

Derek P. Baudains, Paul Broxup,

Markus Gresch

Investment manager:

2trade group ltd., Zug

Management team:

Sammy Matter, Martin Treffer,

Daniel Biedermann

Auditors:

PricewaterhouseCoopers, Zürich

Corporate structure:

Public limited company

Inception:

18.12.02

Type of stock:

bearer shares

Shares outstanding:

395,753

Market capitalization:

CHF 14 mn

Listing:

Swiss Exchange SIX

Fees:

Management fee of 1.5% p.a.,

Performance fee 20%

current hurdle at CHF 34.24

Security number:

146 29 83

Reuters:

FFI.S

Bloomberg:

FFI SW Equity, FFI SW Equity NAV

Net asset value:

Website daily, Wednesday/Saturday in FuW

(Finanz und Wirtschaft)

Address:

2trade group ltd.

Baarerstrasse 2, CH-6300 Zug

Investor relations:

Dynamics Group Ltd.

Alexandre Müller

Tel.: +41 43 268 32 32

Internet:

www.formulafirst.vg

E-mail:

info@formulafirst.vg

Attachments

  • Original document
  • Permalink

Disclaimer

Formulafirst Ltd. published this content on 02 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 July 2021 15:47:03 UTC.