Artemis US Select Fund quarterly review, December 2023

Cormac Weldon and Chris Kent, managers of the Artemis US Select Fund, report on the fund over the quarter to 31 December 2023.

Cormac Weldon

Source for all information: Artemis as at 30 September 2023, unless otherwise stated.

Fund objective 

The fund’s objective is to grow capital over a five-year period.

Performance

The fund returned 8.3% over the quarter, outperforming its benchmark, the S&P 500 index1, which returned 6.9%. The fund’s second benchmark, the IA North America NR,2 returned 7.2%.

For full five-year discrete performance, please see below. Please remember that past performance is not a guide to the future.

Inflation in check?

As had been the case for most of the year, markets were fixated on inflation and the likely path the Federal Reserve (the US central bank) would take in terms of interest rates. At the start of the quarter, it was widely accepted by the market that interest rates would remain higher for longer to combat stubborn inflation.

As the quarter progressed, it became clear that inflation was trending lower towards the Federal Reserve’s target of 2%, supported by falling demand for goods and services and a more balanced employment market. The central bank confirmed the market's expectations at its meeting in December when it signalled a pause in interest rate hikes, and went further, forecasting three interest rate cuts of 0.25% each in 2024.

Amazon

Our holding in Amazon was the top contributor to performance during the period. In its latest results, it reported improved profitability in its retail business and a recovery in AWS, its cloud computing business.

US housing market

If you have read or listened to us talk about our holdings in the fund you will have heard us discuss our belief in the US housing sector.

There are multiple reasons for our positive view. Broadly, there is a shortage of housing in the US. Higher interest rates have also had an effect. Most mortgages in the US are not portable and so moving home would result in a higher mortgage rate. As a result, not many houses are changing hands, while growing demand is being met with new buildings. We are investing in this trend by buying housebuilders and suppliers of building materials.

Our holdings in this area include Builders FirstSource (a distributor of homebuilding products) and Eagle Materials, which manufactures cement and wallboard.

Healthcare and energy lag

Energy was the only negative sector over the period, and so our holdings in Baker Hughes (oil field services) and Hess (oil & gas) detracted from performance.

Our holdings in healthcare shares Thermo Fisher, Dexcom, and McKesson were also weak over the period. We continue to see healthcare as a significant opportunity moving into 2024.

Buys and sells

We have made several adjustments to the fund over the period, either because of strong share price performance or to better position the fund for lower interest rates.

We have taken profits in both semiconductor designer Nvidia and social network provider Meta, two of our strongest performers last year. Within financials we increased our position in Wells Fargo which we had bought in the last month or two. We also added to our position in Blackstone (private equity).

Outlook

First, we see the continuation of recovery in areas we are already exposed to such as housing and infrastructure investment. In addition, we still think there are a couple of sectors which have not yet normalised following the pandemic. One of them is healthcare, where we expect the demand for scientific products and services to recover to a more normal level. We expect our holding in Avantor to benefit from this.

Another potential recovery area is the memory-chip sector. After a boom in demand followed by a period of oversupply, pricing collapsed. We believe pricing has now stabilised and is on the path to a strong recovery given supply and demand is more balanced. We have a holding in Western Digital to capture this dynamic.

1S&P 500 TR A widely-used indicator of the performance of 500 large publicly-traded US companies, some of which the fund invests in. It acts as a ‘comparator benchmark’ against which the fund’s performance can be compared. Management of the fund is not restricted by this benchmark. 
2IA North America NR A group of other asset managers’ funds that invest in similar asset types as this fund, collated by the Investment Association. It acts as a ‘comparator benchmark’ against which the fund’s performance can be compared. Management of the fund is not restricted by this benchmark.  

Discrete performance, 12 months to 31 December
 2023 2022 2021 2020 2019
Artemis US Select Fund 21.8% -14.9% 22.7% 15.2%

29.1%
S&P 500 TR GBP 19.2% -7.8% 29.9% 14.7% 26.4%
IA North America NR 17.6% -10.5% 26.1% 16.4% 24.5%
*Past performance is not a guide to the future.
Source: Artemis/Lipper Limited, class I accumulation GBP to 31 December 2023.
All figures show total returns with dividends and/or income reinvested, net of all charges.
Performance does not take account of any costs incurred when investors buy or sell the fund.
Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class.
Benchmark is S&P 500 TR.

Market volatility risk

The value of the fund and any income from it can fall or rise because of movements in stockmarkets, currencies and interest rates, each of which can move irrationally and be affected unpredictably by diverse factors, including political and economic events.

Currency risk

The fund’s assets may be priced in currencies other than the fund base currency. Changes in currency exchange rates can therefore affect the fund's value.

Concentration risk

The fund may have investments concentrated in a limited number of holdings. This can be more risky than holding a wider range of investments.

THIS IS A MARKETING COMMUNICATION. BEFORE MAKING ANY FINAL INVESTMENT DECISIONS, REFER TO THE FUND PROSPECTUS, AVAILABLE IN ENGLISH, AND KIID/KID, AVAILABLE IN ENGLISH AND IN YOUR LOCAL LANGUAGE DEPENDING ON LOCAL COUNTRY REGISTRATION, FROM WWW.ARTEMISFUNDS.COM OR WWW.FUNDINFO.COM.
ARTEMIS DOES NOT PROVIDE INVESTMENT ADVICE ON THE ADVANTAGES OR SUITABILITY OF ITS PRODUCTS AND NO INFORMATION PROVIDED SHOULD BE VIEWED IN THIS WAY. ARTEMIS ONLY PROVIDES INFORMATION ABOUT ITS OWN PRODUCTS AND SERVICES AND DOES NOT ADVISE INVESTORS. SHOULD YOU BE UNSURE ABOUT THE SUITABILITY OF AN INVESTMENT, YOU SHOULD CONSULT A SUITABLY QUALIFIED PROFESSIONAL ADVISER.

 

 

Cormac Weldon

Manages:

US equity strategy

Cormac has managed Artemis’ US equity strategies since launch.

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Chris Kent

Manages:

‘US Select’ strategy

Chris co-manages Artemis’ ‘US Select’ strategy

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More about the Artemis US Select Fund

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