March 2023 saw renewed liquidity risk for banks. The poorly managed Silicon Valley Bank was the first high-profile victim of massive rate hikes made by central banks since 2022. This drew the banking sector into a maelstrom. At present, central banks appear to have quelled worries of contagion, while continuing moderate rate hikes. In these turbulent times it is high-quality shares, especially those providing superior visibility, which are the most desirable. The Amplegest Pricing Power fund rose 3.64%, outperforming its benchmark index (3.26%).
In this chaotic month, our portfolio of companies with significant pricing power trended positive overall. Companies with exposure to China, and to the luxury sector in particular, were spared the agitation shaking up the West: MONCLER, L’ORÉAL, LVMH and KERING (position opened in March) all outperformed. Another highlight of March 2023 was the widespread adoption of artificial intelligence software, which befitted semiconductor shares (ASML). INFINEON surprised investors when it raised its earnings target for 2023. INWIT benefitted from rumours of exchanges in equity stakes.
At the other end of the spectrum, ICON, which provides clinical trial services for pharmaceutical labs, was negatively affected by fears of a slowdown in biotech financing. Nonetheless the group reaffirmed its annual targets. Certain cyclical shares underperformed under challenging conditions (LEGRAND, SMURFIT KAPPA, AIRBUS, MERCEDES BENZ, et al.).
In our portfolio SOITEC was closed, while positions in KERING and INTERPUMP were opened. KERING will profit from China’s opening up to the rest of the world again. The Gucci brand accounts for two-thirds of the group’s profits and is in full expansion. INTERPUMP is an Italian niche leader in high-pressure piston pumps with a wide variety of industrial uses. Their products are both vital and indispensable in their markets, creating margins which are the sector’s best in class. A typical ‘pricing power’ company!