BMC Global Select January 2025

The stocks that were the best contributors during the month were Hermes, HCA Healthcare, and Alphabet. The first two have in common that they had, in our view, an unfairly poor end to 2024. When the market took its holiday break and had time to think, these stocks picked up again at more realistic valuations. On the weaker side were NVIDIA, ICICI, and Apple. There seems no reasonable explanation, in our eyes, for ICICI's poor performance. The NVIDIA and Apple shares both performed well last year and now their valuations are turning in the other direction. The market gives and the market takes. And in the big picture, many stocks moved in our favor during the month.

The month was largely overshadowed by Donald Trump's inauguration as US president, and he has come with one stunt after another, shaking the markets. Some have been positive, such as the hefty AI investments he promises for US tech companies and foreign investors. Others have been negative, like the enormous tariffs threatened one day only to be withdrawn the next. Our view for these four years is that we know the following: 1) It will be like this the entire time, one move after another, back and forth, with both threats and flattery. 2) There is thus no reason to react rashly, but rather to own a portfolio of stable companies and to focus on the long term. If something large happens, we will of course adjust, but the fact is that in two years' time we'll start talking about the next president. 3) More than anything, Trump and his associates are focused on growth, so despite this tumult and these dramatic headlines, there will also be opportunities for us investors. Let's put our focus on this latter.

Key market events and trends (what has influenced performance most?)

The start of the year has been turbulent, to say the least, as we have discussed above, but our funds have also gotten off to an excellent start, with no doubt about the major investments into AI in the US, China, and other countries. During January, we attended the CES trade show in Las Vegas—one of the most important tech events in the world—where the recurring theme was, of course, AI and how to monetize the new technology born out of NVIDIA's software and hardware products. The queue for Jensen Huang's opening speech at CES was hundreds of meters long, revealing how great the interest in everything AI is. Such excitement was also a little troubling, and we will be keeping an eye on the company's valuation and won't hesitate to take profits if needed. The DeepSeek news regarding China's recent advances in AI modeling and the claim it can create much cheaper and more efficient AI models, has led to sharp drops in AI-related share prices, indicating just how much momentum these stocks have had recently.

Portfolio changes 

We made four changes to the fund during January. We invested in 3i, a British company with a robust position thanks to investments in the European discount trade. We financed this investment by taking a pause in another consumer-related stock, Nestle. This is a share we'll likely come to back to in the foreseeable future and in which we still see upside, but we had to sacrifice something to fulfil our wish to invest in 3i. We will still monitor Nestle and look forward to returning to invest in it. We also sold our position in Germany’s Vonovia, and bought into US firm Charles Schwab. The company is the leading US online broker, and here we see strong potential earnings growth for 2025 and 2026. This is based on fairly verifiable assumptions for the company in terms of its net interest income margin. Despite the Fed’s rate cuts, Charles Schwab is expected to improve its net interest income by paying back the expensive short-term financing it was forced to take owing to increased customer withdrawals during the years of accelerating inflation.

The fund's positioning—our market expectations

We hold a solid and diversified global portfolio of what we consider the world's finest companies—our Champions—in sectors such as industrials, retail, software, real estate, building materials, and insurance. We also hold an exciting collection of Special Situations, which we invest in at relatively low valuations and aim to sell at higher levels. Our goal is to gather pace in our portfolio in 2025, and during our days here in Bangalore and Delhi, we will visit many potential new holdings. But more on this in our next newsletter.

* MSCI All Country World NTR $ in EUR