WEEK 26 | JULY
OVERVIEW
Financial Markets & Economies: Second Half
Good to know: The U.S. Economic Growth
Your portfolio highlights: Solar Special Value Fund, Akastor ASA
In other news: Brookfield Completes Special Dividend and Creation of Brookfield Asset Management Reinsurance Partners Ltd., Brookfield to buy Modulaire Group in $5B deal, Simon Wilson to succeed William Stovin as President of Markel International
Financial Markets & Economies
We are now in the second half of the year which we hope will be as good to us as the first half of the year. We saw tremendous economic recovery especially in developed countries accompanied by stock market surges. Equity and commodities were leading the pack while fixed income securities lagged. There were inflation and interest rate concerns, but this did not hinder stellar stock market performances. The projection for the second half of the year is no different. The recovery is expected to continue and even accelerate. The U.S. is expected to remain the global leader in the COVID-19 recovery (read more in the following section) according to Bank of America seeing their strong economic data, improving coronavirus situation, and the stimulative policy mix. The factors influencing this recovery are: the pick-up in spending, expected increase in labor market engagement, and elevated corporate cash levels. Furthermore, Bank of America bets on a continuation of the market rotation from growth to value. With a recovering/ booming economy it seems logical to (re-)allocate capital to more economically sensitive areas. Value stocks are also more prone to benefit from rising inflation and interest rate environments.
Stock Indices - Year-to-date movement
Dark Blue: S&P500
Purple : Nasdaq
Baby Blue: Dow Jones
Good to Know
No one would argue that the U.S. economic recovery has been remarkable so far. In fact, it is so remarkable that it is lifting the whole global economy. Americans are spending their pent-up savings not only domestically but also abroad. To put it into perspective, the recent U.S. stimulus package alone is expected to lift output in Japan, China, and the Eurozone by 0.5 percentage point in the next 12 months said the Organization for Economic Cooperation and Development (OECD). This is up to 1.0 percentage point in countries such as Canada and Mexico. Most countries welcome this burst of demand, but it does not come without its effects. These effects are seen as shipping bottle necks in Asia, effected currencies, and commodity prices. While some countries will benefit from surging U.S. trades, others are faced with the risk of inflation, a stronger dollar, and higher bond yields. This may slow their recoveries especially when it comes to emerging economies. The U.S. dollar already dominates both the international debt market and the foreign exchange reserves. This leads us to think that the growth we will witness in the U.S. will surpass the growth we saw in China this past decade and a half. Contrary to the U.S., Europe is experiencing a slower recovery due to weak consumer spending. China on the other hand is growing strongly but is expected to slow later in the year due to their plans on controlling/ limiting their country debt level. The U.S. economy is expected to grow by 6.9% this year which is its strongest recovery since the 1980s. This is good news since American consumers are the bedrock of global trade. Twenty-seven percent (27%) of final consumption expenditure worldwide are accredited to U.S. accounts compared to 11% for China.
Your Portfolio Highlights
The Solar Special Value Fund (SSVF) seeks substantial capital appreciation by investing in about forty international publicly traded equity securities. The Fund puts emphasis on individual security selection based on thorough fundamental analysis rather than general equity market movements. The Fund concentrates its research and capital on special investment ideas encountered by our investment managers. This can be undervalued conglomerates, family companies or other specific investments. Some of these investments carry a greater risk, but this allows for extraordinary return potential in the future. The Fund returned +16.94% so far this year with Akastor ASA being one of the main contributors in the month of June (+8.80%).
Akastor is an oil-services investment company with a portfolio of industrial and financial holdings. The company has a flexible mandate for active ownership and long-term value creation. Akastor was established as an investment company back in 2014 following a demerger of Aker Solutions with a portfolio of companies. As a descendant of the Aker group, Akastor can trace its roots back more than 170 years to the founding of the Aker Mechanical Workshop on the banks of the Akerselva river in Oslo in 1841. Aker Holding AS, which is owned by Aker ASA, is the largest shareholder of Akastor holding 36.7%. The shares of Akastor are traded on the Oslo Stock Exchange. The company’s head quarter is situated in Oslo, Norway. In 2014 Aker Solutions ASA was renamed to Akastor ASA and established as an oil-services investment company which continued to be listed on the Oslo Stock Exchange under its new name and ticker (AKAST). Simultaneously, Aker Solutions group’s activities pertaining to subsea, umbilicals, maintenance, modifications and operations and engineering were spun off into a new company that took the name “Aker Solutions” and was stock listed at the Oslo Stock Exchange with ticker AKSO. Akastor has operations in Europe, the United States, Brazil, Asia, and the Middle East. The company offers drilling equipment, drilling riser solutions, and related products and services for the drilling market. It also provides vessel-based subsea well construction and intervention services to the oil and gas industry. In addition to these Akastor provides well design and drilling project management services, reservoir and field management services, rig procurement, training, software, and technical manpower services, as well as well and reservoir consultancy services and supplies vapor recovery units and systems. Akastor is valued around kr9.52. *Please visit the Akastor website for more information or click on one of the images below for their latest presentation.
Akastor - June stock price movement
In Other News
Brookfield Completes Special Dividend and Creation of Brookfield Asset Management Reinsurance Partners Ltd.
Brookfield to buy Modulaire Group in $5B deal
Simon Wilson to succeed William Stovin as President of Markel International