Monthly Report November 2022
Stock market Friendly
Performance Underperformance
Investments Slightly increased cash position
Outlook Better
Markets
A difficult undertaking in climate policy is acting alone for ethical reasons. Anyone who believes that combustion bans will lead to a reduction in CO2 emissions is mistaken. In the case of fuels that are internationally tradable, savings in a given country mean that the quantities released by that country reach other countries via the market and are consumed there at falling prices. If you want to reduce CO2 emissions, you have to come to a global agreement, but not like the Paris Agreement, where 191 countries signed, but only 61 countries committed to quantity limits. The rest agreed because they thought it was nice that 61 countries wanted to give them the fuel they didn't use themselves. A naive argument is to lead the way in green policy and show the others how it is done so they will follow suit. The example of Germany shows how this policy can ruin the industry, which no one wants to imitate. Green energy does not make it possible to do without fossil energy. The very volatile wind and solar power cannot be utilized if the fluctuations are not compensated by countervailing variations of conventional energies. In lulls (windless, dark), the latter have to handle the entire supply on their own.
Performance
In a friendly market environment, Formulafirst Ltd.'s November 2022 Net Asset Value gained 1.74% compared to the previous month. The MSCI Europe increased by 6.74%. The resulting underperformance of Formulafirst Ltd. compared to the MSCI Europe index is 5.0 percentage points for the month of November 2022. Since the beginning of 2022, an underperformance of 12.02 percentage points has resulted.
Investments
Rational AG is getting very good feedback for the iVario appliance, especially from the USA. The CEO of the company expects the same boom for the iVario as for the iCombi. Group inventories and accounts receivable were high because business was also very strong. In the first 9 months, the price effect was 7-8% in favor of Rational and in 2023 this should be repeated to the same extent. In North America, the small customer business is developing well as well as the key account business. Rational has enough components to be able to continue the good business performance of Q3 in Q4. The CEO emphasized that Rational certainly does not want to reduce R&D costs. Swatch Group invests even in difficult times because they have a long-term view. The perception of Longines products is higher than the price of them, which opens up further potential. Hayek finds the lower price segments such as Longines very interesting. These have a higher potential in terms of units than the top segment. That is why Longines, among others, is to be promoted further. This name is not associated with exclusivity, so the potential is almost unlimited. This also applies to the Tissot brand. In terms of industrial base, Longines is well positioned. Young watch buyers want to know something about the origin of the watch and not just be presented with marketing. Emotions and innovations are also very important. 7 months after the launch, the queues in front of the Moonswatch points of sale are still very long, especially full of young people!
Outlook
The tug of war in the US stock market means that the market may be in for an extended bottoming phase with enormous volatility, until the economy softens markedly or core PCE inflation begins to break. We continue to believe that inflation has peaked out, a key factor underpinning our constructive view on the US stock market beyond 3 to 6 months. Finally, we believe we are at the tail end of the monetary tightening cycle. Powell has suggested that the 3-month to 10-yeaer spread is the best indicator for policy overkill and recession. This spread has recently inverted, suggesting that money is very tight and rate hikes are very late.
Performance as of November 30, 2022
Net Asset | November | Since | ||
Value | 2022 | 2022 | 3 years | inception |
CHF 26.85 | 1.74% | -20.61% | -12.43% | 3.65% p.a. |
Share price development as of November 30, 2022 (indexed)
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Formulafirst (CHF) MSCI Europe Index (EUR) SO Index (EUR)
Breakdown by sectors
Materials | 28.9% | |||||||||
Consumer discretionaries | 22.0% | |||||||||
Healthcare | 15.6% | |||||||||
Industrials | 8.8% | |||||||||
IT | 8.6% | |||||||||
Consumer staples | 5.3% | |||||||||
FX | -0.2% | 11.0% | ||||||||
Cash | ||||||||||
Country Breakdown
Germany | 34.8% | ||
Switzerland | 65.2% | ||
The largest positions
Holcim Ltd. | 12.6% | |||||||
Swatch Group AG | 11.8% | |||||||
SGS SA | 8.8% | |||||||
SAP SE | 8.6% | |||||||
Wacker Chemie AG | 7.0% | |||||||
Forbo hold. AG | 7.0% | |||||||
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 26.39), at the previous year end (CHF 33.82) respectively 3 years ago (CHF 30.66). 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)
30.11.2022
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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: | 268,313 |
Market capitalization: | CHF 7.2 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 |
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Formulafirst Ltd. published this content on 01 December 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 December 2022 16:53:08 UTC.