Unlike large-cap indexes, which were boosted by earnings announcements of companies with the heaviest weightings, European small and midcap companies have begun 2024 on a slightly down note. Despite a very strong performance from financial shares (+4.6% in January), and yet another postponement of the date for the first of a series of rate cuts in the U.S., Amplegest MidCaps managed to outperform its benchmark index (relative performance of +102 bps).
Positive contributions came from the fund’s largest positions. GTT and Sopra continue to do well, and ID Logistics announced turnover which resuscitated investor interest. In addition, a significant part or the relative performance is attributable to a rise in consumer spending by UHNWIs. We are exposed to this trend through Italian yacht constructors The Italian Sea Group (+16% in January) and Sanlorenzo (+4%). These companies enjoy strong barriers to entry (expertise, customer relations), solid balance sheets and excellent visibility with order books already full for the next two years. On the contrary, our holdings in the technology sector hurt fund performance in January. Investors are worried about poor earnings from semiconductor companies with exposure to the automobile industry (Soitec, X-Fab).
In January we opened a position in Ermenegildo Zegna. Founded in 1910 in Italy, Zegna is one of the oldest luxury menswear houses. Like Hermès and Channel, Zegna’s production chain is vertically integrated. Zegna has some of the highest turnover and operating income figures of its sector (respectively +10% and +20% per year over the medium term), and a very reasonable valuation.
We have tweaked the portfolio here and there, taking profits from ID Logistics and GTT, and trimming Neoen ahead of publication.