In March, Amplegest PME turned in a performance comparable to that of its benchmark index (–5.45% vs. –5.59%), in a market where once again smaller stocks were severely punished.
We believe that French small caps are being hurt by the protest movements related to pension reforms. This social crisis sends a very negative image to investors and creates an ever-rising wave of sellers. We fear that the crisis will have a significant effect on results in the first half of 2023, which was already expected to be challenging because of an unfavourable base effect (there were no crises in Q1 22, and the war in Ukraine didn’t seriously impact markets until Q3 22). More generally, inflation remains the core concern and is showing no sign of slowing down. With energy costs clearly trending down , we are trying to pinpoint what might trigger even the slightest rise in prices. Nothing could be less clear! By contrast, in the medium term the development of artificial intelligence could profoundly transform our economies and push them into a new, long-term deflationary era.
Turning to stock picking, many of our companies have published results either in line with forecasts (ID LOGISTICS, EQUASENS, REWORLD, VIRBAC, INFOTEL, CHARGEURS, ESKER, REPLY, EKINOPS, SPIE, SECHE) or significantly better (LFDE). Here are three of the more disappointing earnings announcements:
1. PRECIA saw a slowdown in business in Q4 2022 (orders postponed to Q1 2023).
2. GRAINES VOLTZ revised down its outlook because of the drought in France in February. Once again, vegetable crops in Europe will decline sharply as a result of global warming.
3. WAVESTONE lowered its margin target (from 15% to 14.5%) for its current financial year, which ends in March 2023. This is due to slower than expected project implementation during the first two months of the year.
Note that FOUNTAINE PAJOT was the month’s worst contributor, despite its shares being an excellent example of both value (2.3x EBIT 2023) and growth (CAGR ROC +22% by 2024).
In March we invested 2% of AUM, lowering cash to 5%.