MONTHLY FUND UPDATE SEPT 2020 - PUBLICATION BY - University of St. Andrews Investment ...

PUBLICATION BY                  PREPARED BY
ST ANDREWS INVESTMENT SOCIETY   JASMIN ESERMANN

MONTHLY
FUND
UPDATE
SEPT 2020

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                                                   ST ANDREWS INVESTMENT SOCIETY

GENERAL PORTFOLIO                                  1M: -2.39%      ▼
                                                                 3M: +3.22%             ▲
OVERVIEW                                                  12M: +5.91%          ▲
Portfolio performance reflects a slow              stalled U.S. fiscal stimulus talks, the
and steady economic recovery since                 upcoming presidential election and
March lows, with current returns                   surging coronavirus cases across the
climbing higher than pre-Covid levels              European continent, ended on a positive
at a 5.91% year-over-year return.                  note with stocks sharply rising towards
Closely tailing the S&P 500 index, the             the end of the month.
portfolio was similarly affected in the            The portfolio was down 3.09%, as all
turbulent month of September, which                sectors posted negative returns with the
saw the S&P 500 enter a correction                 exception of Health Care &
territory and post a 3.92% loss. The               Pharmaceuticals (+0.70%), however,
10% pull back, led by mega-cap                     regained momentum in the last week of
technology stocks and spurred by                   September (+0.98%).
uncertainty surrounding

               52-Week Portfolio Performance Relative to
                         S&P500 Benchmark
                                 Portfolio Index    S&P500 Index

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                         ST ANDREWS INVESTMENT SOCIETY

            OUTLOOK
            We can expect a surge in market
            volatility throughout the fourth
            quarter, highlighted by several key
            indicators:

            The uncertain election outcomes with a pivot
            towards a ‘blue wave’ scenario and increasing
            possibility of a substantial fiscal stimulus
            package, a major tailwind for Corporate
            America.
            There is investor optimism regarding a potential
            vaccine breakthrough by year-end, yet risks
            include halted experimental Covid-19 drug trials
            due to safety concerns.
            Fractious Brexit negotiations and an impending
            threat of no-deal result, as well as virus
            containment measures in Europe to fight the
            second wave of infections, leave market jittery.
            China reported strong trade data for
            September and showed signs of a significant
            pickup, with imports rising 13.2% year-on-year,
            far above the predicted increase of 0.3%.
            China’s economic recovery continues to
            accelerate and GDP is expected to grow 1.6%
            this year, an encouraging sign for the rest of
            the world.

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                     ST ANDREWS INVESTMENT SOCIETY

    Sector Exposure- September 2020

    Best and Worst Performing Stocks

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                                         ST ANDREWS INVESTMENT SOCIETY

   SECTOR SPOTLIGHT
   Healthcare & Pharmaceuticals
   Charles River Laboratories, Inc. (NYSE:CLR)

   Increasing portfolio performance over recent months has been greatly
   driven by the rising shares in the Health Care & Pharmaceuticals sector,
   holding the largest sector allocation of 35.66%, with a 3.18% return over the
   last 12 months.
    Leading the sector performance is Charles River Laboratories (NYSE:
   CRL), an early-stage contract research company that has seen shares jump
   68.37% the past year.
   CLR has continuously surpassed consensus EPS estimates over the last four
   quarters, with Q2’s results producing an EPS of $1.84, an earnings surprise
   of 24.41%.
   Regarding future outlook, stocks in the healthcare sector have been prone
   to substantial volatility around the US elections due to its implications on
   national healthcare provision. Nonetheless, CLR’s EPS is predicted to grow
   8% this year, outclassing the industry average growth of 2.2%.

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                                           ST ANDREWS INVESTMENT SOCIETY

   SECTOR SPOTLIGHT
   Financial & Professional Services
   The Goldman Sachs Group, Inc. (NYSE:GS)

   Stocks of the Financial & Professional Services sector, comprising 19.4% of
   the portfolio have seen a weak increase with a 0.89% 52-week return.
   Goldman Sachs (NYSE: GS), a leading investment bank and financial
   services company, currently trading around $210, has benefitted from the
   heightened trading activity this year as a result of volatility in markets, yet
   Fed’s near-zero rates and weak loan demand have provided limited
   operating abilities for revenue growth.
   Goldman Sachs is diversifying away from its less profitable traditional
   business operations in trading and capital markets, by venturing into new
   businesses including cash management and credit cards. The bank is to
   purchase General Motors Co’s card business for approximately $2.5B,
   which will be Goldman’s second victory in the credit-card sector following
   its underwriting of Apple Card launched last year.
    The common industry trend indicates less volatility, more stability:
   competitor Morgan Stanley is undergoing a similar strategy change by
   expanding its operations in investment management. MS has agreed to
   acquire asset management firm Eaton Vance for $7bn, just several days
   after closing a $13bn takeover of ETrade, an online brokerage.

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                                         ST ANDREWS INVESTMENT SOCIETY

   SECTOR SPOTLIGHT
   Industrials & Natural Resources
   Sealed Air Corporation (NYSE:SEE)

   Industrials & Natural Resources has been the hardest hit sector of the
   portfolio, down 0.26% YOY, having been severely impacted in the earlier
   months of the pandemic. Production stoppages resulting from factory
   closures, supply chain bottlenecks as well as a fall in demand and a volatile
   energy market have crippled the sector.
    The IHS Markit US Manufacturing PMI for September saw a robust
   increase to 53.5, from 53.1 in the previous month – the largest increase in
   factory activity since January 2019.
   Shares of Sealed Air Corporation (NYSE:SEE), the North Carolina-based
   company focusing on Cryovac food packaging and Bubble Wrap
   cushioning packaging, have seen strong performance recently, currently
   trading at $41.52 per share, up 6.9% over the past month.
   The stock has rallied 23.9% over the past three months, compared with the
   industry’s 10.5% gain.
   Sealed Air Corp. has seen an impressive record of four-quarter earnings
   surprises averaged at 17.9%, reporting an EPS of $0.76 versus the $0.54
   consensus estimate in Q2.

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                                       ST ANDREWS INVESTMENT SOCIETY

   SECTOR SPOTLIGHT
   Consumer Goods & Services
   The Coca-Cola Company (NYSE:KO)

   Returns of the Consumer Goods & Services sector of the portfolio have
   seen a gradual recovery since the coronavirus-driven losses in early 2020,
   with 52-week return levels unchanged.
   Consumer equities followed the general downward trend in September, yet
   the S&P 500 Consumer Staples index outperformed the wider S&P 500’s
   loss and was down by 1.5%.
   Coca-Cola Co. (NYSE:KO), the largest nonalcoholic beverage entity in the
   world, is currently trading at $50.22 and saw a total return of 0.5% in
   September and an increase of nearly 10% the past three months, led by
   improved expectations of consumer spending and the brand’s prominent
   market presence and brand loyalty.
   Operating profits of Coca-Cola had declined 34% in Q2 with volumes
   shrinking 16% YOY.
   Coca-Cola will release its fiscal third-quarter earnings on Oct. 22, with
   analysts expecting revenues of $8.34 ($9.5) billion and EPS of $0.46
   ($0.60), a drastic decrease from the previous quarter.

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                                        ST ANDREWS INVESTMENT SOCIETY

   SECTOR SPOTLIGHT
   Technology, Media & Telecommunications
   The Walt Disney Company (NYSE:DIS)

   Stocks of the Technology, Media & Telecommunications sector of the
   portfolio have seen a year-over-year increase of 2.99% in returns, with the
   COVID-19 pandemic accelerating media and tech trends and increasing
   consumer demand for content.
   The Walt Disney Company (NYSE:DIS), a diversified worldwide family
   entertainment and media enterprise, has been sharply impacted by the
   pandemic and been forced to lay off 280,000 employees at its California
   and Florida theme parks, with reopening plans remaining on hold and the
   demise of movie theatres causing the delay of new film releases.
   The company reported EPS of $0.08 in fiscal Q3, a 94% drop from the
   previous year, yet exceeding estimates of a $0.43 loss, whilst revenue fell
   42% to $11.78B.
   Meanwhile, global Disney+ subscribers have topped 60 million and the
   direct-to-consumer revenue saw a 2% rise to $3.97B last quarter
   Disney is restructuring its media and entertainment segments to boost its
   streaming business. Following the announcement, the Disney stock jumped
   4.7% to $131.54 and gained around $11B in market capitalization, however, is
   still trading below the $145 level at the beginning of the year.

Contact the FMT for more information:
Email: fmt@sta-investsoc.com
Website: www.sta-investsoc.com

Victor Gong               Robbie Turnbull
Head of Fund              President of Investment Society
FPS Sector Coverage       EMK Sector Coverage

Jasmin Esermann            Jackson Stafford
Head of Investor Relations Head of Operations
CGS Sector Coverage        HCP Sector Coverage

Nathalie Nourry
Head of ESG
TMT Sector Coverage

Daniel Khajenouri
Head of ESG
INR Sector Coverage