7th May 2011

Artemis: The Hunters' Tails

Herculean breams ...

As markets slide, and the FTSE 100 seems more comfortable well on the wrong side of 6,000, at least the Augean clean-up continues. After returning to profit (sic) last year, Lloyds has provisioned £3.2 billion against all those self-employed people spun, lured and sold, ah, redundancy insurance. Now (one of) the people's bank(s) seeks the kind of peacefulness evident even in the names of English coarse fish: roach, rudd, dace, bleak, barbell, bream, gudgeon, pick, chub, carp, tench.

“Fed proposal would require lender to make sure borrower can repay", went one of America's headlines this week, testament to just how barmy things had become. Most Americans, understandably, have their minds on what happened in a small city named after a 19th-century British major called James Abbott. Yet yesterday the US government still filed a case for $1 billion against Deutsche Bank over its "reckless" mortgages in liberty's land.

Such cleansing all bodes well for the medium and longer term. When Hercules got there, King Augeas' stables had not been cleaned for 30 years. Nor, at least, had ours. And as we write Brent crude is down, obligingly, by more than $12 a barrel to $109 -- a move that smacks of speculators leaving the market. Also on fears of slowing economic growth -- all eyes on US (un)employment numbers later today -- and rising inflation, cocoa, silver, copper and tin have also fallen steeply. But April was a month in which, after a prolonged absence, at least the concept of a "broad market" returned. So let it be.

Because taking stock, we see ...
Our optimism (or, as appropriate, pessimism) turns of course on stocks. How lies that land? Of European companies to have reported Q1 2011 earnings so far, we note that 68% of them have beaten the market's expectations. It's early days, but so far this is the most encouraging percentage since Q1 2005. In the US, Q1 2011 reporting is in flood full. So far 77% of companies have beaten expectations. In aggregate the stocks we own have had better results and more upgrades than the market. This has helped Philip Wolstencroft's European Growth Fund, for example (good performance from Leoni, Hugo Boss, VW) -- even if, in some instances, the market thinks that success now can only mean failure in future (ASML.)
Many companies, in short, are in health rude. For example, [y]our James Foster of Strategic Bond Fund is finding much to buy in the high yield market: enter new issues from OTE, a Greek telco likely to be sold by the government to help finance its deficit, Thames Water and Kion Group (forklifts etc.)
As for equities, consider Domino Printing (held in UK Special Situations.) It has just announced a new JV for tracing eggs. Wot? Well, US legislation now requires 'full source data' on a range of foods. This JV is first to market with a full solution for eggs. It is Domino's innovative (and British) technology which will print the data on the shells, and the US market alone is some six billion dozen, aka 72 billion, eggs.
For the rest? This week nine of the world's 10 fastest growing cities were declared to be Chinese. (New York is there. Otherwise it's Shanghai, Beijing, Tianjin, Chongqing, Shenzhen, Guangzhou, Nanjing, Hangzhou and Chengdu.) Domino's, think Derek and Ruth, will go east on an egg.

Speaker's corner ...

“Go to heaven for the climate, hell for the company."
- Mark Twain (1835 -- 1910)

And we welcome ...

To manage high conviction global portfolios, in particular (subject to FSA approval) the imminent Artemis Global Select Fund, two new fund managers have joined us this week: Simon Edelsten and Alex Illingworth. Simon was most recently a partner at Taube Hodson Stonex where, in a five-man team, he had joint responsibility for global equities. Alex was Director of Global Equity at Insight Investment. Simon and Alex will be managing focused global equity mandates, the fruit of fundamental stock-picking, for both our retail and institutional clients. They are looking forward to meeting you in due course.
Meanwhile, do look at its numbers. In complement to what Simon and Alex's fund will do, Peter Saacke's resurgent, quant-based Artemis Global Growth Fund grows on.

While energetically ...

The new Artemis Global Energy Fund raised a creditable £70 million in its offer period to 21 April. If you were part of that, thank you. Now John Dodd, soon to be aided by Richard Hulf (subject to FSA approval), is getting on with it. As Henry Ford said, you can't build a reputation on what you are going to do.

Investments