Artemis US Select Fund update

Cormac Weldon and Chris Kent, managers of the Artemis US Select Fund, report on the fund over the quarter to 31 March 2024.

Cormac Weldon

Source for all information: Artemis as at 31 March 2024, unless otherwise stated.

The fund’s objective is to grow capital over a five-year period. Over the quarter to 31 March 2024, it returned 17.3%, outperforming its benchmark, the S&P 500 index1, which returned 11.6%. The fund’s second benchmark, the IA North America NR,2 returned 10.7%.

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

Ignoring the speedbumps…

The US stockmarket was remarkably resilient over the first quarter of 2024, shrugging off a shift in expectations for interest rates brought about by elements of inflation that were more stubborn and an economy that was performing well. We also saw a regional banking scare and an increase in geopolitical tensions.

The S&P 500 index shrugged off these fears, posting 22 new all-time highs. Strength was supported by technology shares.

Stock selection drives outperformance

Positive performance came from a range of holdings. Stocks in the technology, industrials, and consumer discretionary sectors did particularly well.

A poisoned Apple?

We have a negative view on Apple and only hold a small position. We think Apple has meagre growth prospects, overly reliant on one product, the iPhone. It is therefore sensitive to a softening in demand which of late has come from China, where Apple is experiencing an increase in competition from the likes of Huawei, and a general hostility towards Western companies.

Meta continues to deliver

In contrast to Apple, we have a positive view on Meta (formerly Facebook), where we see a company that has reengineered its business through cost discipline, bolstered by the integration of Artificial Intelligence (AI) within its advertising business. Following Apple’s adjustment of its privacy settings on its operating system in 2021, Meta’s advertising revenue significantly declined due to its reduced ability to target users.What few realised was that Meta owned one of the fastest supercomputers ever built (the AI Research SuperCluster3) which was perfectly suited to regaining most of its signal and targeting ability through the use of AI. This acted as a significant support to the share price as ad revenue recovered.

The rest...

Other long-term holdings continued to perform well, including Saia (the less than truckload [transporting relatively small amounts of freight] company), Constellation Energy (the independent power producer), Western Digital (memory technology), and Eagle Materials (cement & wall boarding).

On the negative side

On the negative side there was nothing over the quarter that truly stood out. There was some weakness in two of our healthcare names, Zoetis and Humana. Zoetis is the animal health company where we see a long-term growth story underpinned by the recent launch of Librela, a pain medication for dogs. Our view on Humana became more negative and we sold it.

Activity – Adding Norfolk Southern, Allstate and Core & Main

We added Norfolk Southern, the rail freight business, where we see a cyclical recovery combined with revenue growth, higher profit margins and share buybacks4. We have also bought Allstate, the insurance business, which stands to benefit from a very positive auto insurance pricing market.

We continued to add to our position in Core & Main. The company distributes pipes and fittings used in water and waste-water applications to local government customers and companies involved in residential and non-residential construction. Water infrastructure in the US has been underinvested in for years and has recently started to receive funding. We also have a long-term bullish view on both residential and non-residential construction which should support a robust volume outlook for the company. The company has also been able to make sensible acquisitions and we expect this to continue.

Taking profits in strong performers

On the sell side, we have trimmed some of our better performing stocks such as TFI International, the trucking company, and Eagle Materials, the cement business.

Outlook – Still finding attractive opportunities

Despite the strong performance of the stockmarket and the fund at the start of 2024, we remain optimistic about the prospects as we move into the second quarter of the year. The economy looks to be in fine shape, despite there being some signs of fraying at the margin. We are aware that the interest rate picture remains uncertain, and we are therefore not wedded to a particular outcome. We focus on individual companies to find opportunities, and as we see it, there is still a very healthy pipeline of ideas coming from a wide range of sectors.

Annualised performance, 12 months to 31 March 2024 2023 2022 2021 2020
Artemis US Select Fund 43.9% -11.9% 12.2% 34.4% 4.4%
S&P 500 TR GBP 27.1% -1.7% 21.2% 40.5% -2.2%
IA North America NR 26.4% -5.4% 16.5% 42.4% -3.4%
Past performance is not a guide to the future. Source: Artemis/Lipper Limited, class I accumulation GBP to 31 March 2024.
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.

 

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.
3Introducing Meta’s Next-Gen AI Supercomputer | Meta (fb.com)
4Share buybacks, also known as share repurchases, refer to the reacquisition by a company of its own shares. Instead of paying dividends, it is an alternative way for a company to return money to shareholders. In most countries, a company is able to repurchase its shares by paying cash to existing shareholders in exchange for a reduction in the number of shares outstanding.

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

Profiling the Artemis US Select Fund, its performance, portfolio and latest updates from the fund manager.

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