Defensive stocks = rubbish
03 April 2024
One of the corollaries of the recent tech craze is that other sectors have been abandoned. Allocation to so-called defensive sectors (healthcare, consumer staples, utilities) has fallen to its lowest level in 20 years.
As these sectors are neglected, we are finding opportunities in them. We initiated two lines last week: Unilever and Sanofi. Both are trading at historically low valuations.
On the other hand, we have this graphic that we published last week on LinkedIn :
Spread US High vs Low Momentum
The performance gap between high and low momentum stocks is at a record high. Investors are buying more of what has already risen. So much for the rest. In short, as long as there's music, there's dancing. And the music is loud. Reddit took advantage of this to launch its IPO: IPO at $34, closing at $50 on the first day. +50%, good timing.
This market schism is accompanied by another signal of complacency: rock-bottom volatility. In practical terms, this means that the cost of insurance is at an all-time low because nobody wants it (we wrote about this a few weeks ago).
But what do we actually do with all this? First of all, don't play the Cassandra and say that everything is inevitably going to collapse. Secondly, keep in mind Howard Marks' adage: "You can't predict, you can prepare". The accumulation of clouds is more a sign of storms than of good weather. For our part, we're staying alert.
Market and portfolio focus
Behaviour:
From 15/03 to 28/03, the fund gained 1.0%, while the CAC 40 gained 0.5% and the S&P 500 2.7%. The main contributors were Alphabet (+0.6%) and Tidewater (+0.3%).
Lines:
During the period, we took a position in Sanofi (4% of the fund) and modified our exposure to the outsourced customer service sector: we sold half our Teleperformance line to take a position in Concentrix, its US counterpart. Our allocation to the sector therefore remains close to 4%.
Have a good week,
Antoine
Disclaimer
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