Maj Invest Global Value Equities - Strategy Profile March 2021
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Maj Invest Global Value Equities Strategy Profile March 2021
Maj Invest
Str ateg y Global Value Equities
C o m pan y Des c r iptio n Maj Invest is a Copenhagen-based asset management company with two major business areas: Asset
Management and Private Equity. Maj Invest was founded in 2005 by the Danish pension fund LD Pensions,
management and employees. Today Maj Invest is owned by management and employees
In v es tm en t Sty le/ Str ateg y The portfolio strategy follows a value-oriented philosophy. This philosophy is in itself a disciplined way of
buying and selling securities based on their market value relative to their intrinsic value. By adopting this
methodology, a strong and focused buy and sell discipline is implemented. Each stock is evaluated via a
screening process on its relevant valuation metrics before being considered for further analysis and, ultimately,
inclusion in the portfolio. Portfolio stocks are also regularly evaluated on their valuation metrics. This strategy
ensures that only really cheap stocks are included in the portfolio, and that stocks which have become too
expensive or fairly valued are removed.
Man ag er Bio g r aph ies Ku r t Kar a is Partner, Head of Equities, Global Value Equities and has 19 years of financial market experience.
Kurt joined Maj Invest in 2005, and his responsibility has been the management of the Maj Invest Global Value
Equities fund since its inception. Prior to joining Maj Invest, Kurt was Equity Strategist at Danske Bank. Previously
he worked at Danske Capital as Portfolio Manager for the Danske Invest Latin American Equities fund.
U lr ik Jen s en joined Maj Invest in 2006 and is Senior Portfolio Manager with co-responsibility for managing the
Maj Invest Global Value Equities fund. Prior to joining Maj Invest, Ulrik was an Analyst and Portfolio Manager with
Sparbank with responsibility for managing the bank's treasury holdings.
C o m pan y A u M 16.7 bn USD
C o m pan y In c eptio n 2005
L o c atio n Copenhagen, Denmark; London, United Kingdom
Reg u lato r Finanstilsynet (Danish FSA)Global Value Equities
Return period Top 10 holdings Strategy information
End March 2021 Return % +/- idx Country Company Weight Strategy size 12.0 bn USD
Total Return* 467.8 187.8 08-04-2004
(percent) Strategy inception
Annualised Return* 11.0 2.6 MSCI World NDR
Benchmark
Month 6.5 3.1 South Korea Samsung Electronics 6.1%
No. of holdings 32
Year to Date 9.7 4.8
United States Low e's Cos Inc 5.7% Concentration of top 10 holdings (%) 47
3 y ears ann. 9.4 -3.4
Base currency USD
5 y ears ann. 11.6 -1.8 Japan Sony Corp 5.7%
Kurt Kara, Ulrik Jensen &
10 y ears ann. 11.2 1.3 Portfolio Manager
United States Intel Corp 5.4% Rasmus Quist Pedersen
* Since inception August 4, 2004
United States Union Pacific Corp 4.5% Top 10 s ector allocation (relative %)
Performance s ince inception
500
United States The Progressiv e Corp 4.5% Sector Weight
450
Consumer Discretionary 17.5
400
Maj Invest Global Value Equities United States American Ex press Co 4.0% Industrials 6.2
350 Financials 3.9
300 United States UnitedHealth Group Inc. 3.8% Real Estate 0.1
250 Materials -0.5
200 United States Facebook Inc 3.7% Utilities -3.0
Energy -3.2
150
MSCI World Holland Ahold Delhaize NV 3.7% Consumer Staples -3.6
100
Health Care -6.5
50 Information Technology -9.7
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Top 10 c ountry allocation (relative % )
Trac k record
Country Weight
Annual returns % (USD) 6.8
South Korea
Return since inception Japan 5.7
Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total Annualised Germany 2.7
Holland 2.2
Strategy (gross) 26.23 12.46 4.06 13.02 21.67 -10.09 24.83 4.31 9.71 467.83 10.98
Taiw an 0.0
Benchmark 26.68 4.94 -0.87 7.51 22.40 -8.71 27.67 15.90 4.92 280.01 8.34
Hong Kong -1.0
Excess Return -0.45 7.52 4.94 5.51 -0.73 -1.38 -2.84 -11.59 4.79 187.82 2.64 Sw eden -1.1
AuM ($) m 1,128 1,291 1,948 3,951 5,549 5,460 7,258 11,043 12,013 Australia -2.1
France -3.3
Source: Maj Invest, Benchmark: MSCI World Total Return Net (Bloomberg ticker: NDDUWI Index)
USA -5.1Quarterly Commentary | March 2021
Market Review
In Q1, the portfolio generated a return of 10.0%, which is significantly higher than the benchmark, which generated a return of 4.9% in portfolio currency.
The positive returns of this quarter’s markets were fueled by many factors. First of all, the continued improvement of the global economic environment provided a further boost to
the global equity markets, and as yields on all maturities rose sharply, equities with lower duration in earnings rose sharply. Since many value stocks are characterized by this
attribute, global value equities had a much-wanted relief rally relative to growth stocks, that tend to have a longerduration earnings.
On a sector-level, the quarter was also characterized by a somewhat different pattern than that for the last year: Tech stocks were under significant pressure while more
traditional sectors such as materials, industrials and especially financials had a very nice quarter. The upcoming years growth acceleration as well as higher yields both tend to be
favorable for especially the traditional sectors. The newly elected Biden administration has also added fuel to the economy, as a 1.9 trillion USD large stimulus bill was passed and
another 3 trillion USD infrastructure spending bill is on the table.
Kurt Kara
Performance Review
The portfolio is significantly invested in US equities, which is due to bottom-up perspectives. Although we have found fewer investment candidates within the US as well as more
investment candidates outside the United States, we have an unbiased approach as to regional allocations, which is reflected in the portfolio’s construction vis a vis risk profile.
The strategy does not in general have a regional or currency "bias", and these factors will hence not affect the strategy’s long-term excess return. Short term fluctuations that seem
determinative may occur from time to time, but these stochastic relationships often disappear over the longer course, as the portfolio is structured in such a way that long-term
effects are eliminated. In addition to ensuring the portfolio's excess return against exposures towards countries and currencies, we also seek to have an excess-return wise un-
biased portfolio against developments in interest rates, commodity prices, etc.
The portfolio is not excess-return neutral to sectors, in the same way as countries, currencies, interest rates etc., as we want to expose ourselves to companies that have favorable Ulrik Jensen
long-term prospects, and such companies rarely exist in, for example, the telecom- or utilities sector. Therefore, at the time of writing, we have a significant overweight in
Consumer Discretionary and Industrials, and zero-weight in the aforementioned sectors. Once again, this is due to a strict bottom-up approach, where we allow these exposures.
The negative development in parts of the Industrials & Consumer Discretionary sector this year has been a negative contributor to the quarter as well as to the year, due to the
escalating trade war between China and the US. However, we expect that the companies we own and have bought in the long term will contribute to a positive return as well as
excess return.
It should briefly be mentioned, that in spite of possible sector and country effects, the by far largest impact on excess return (both the short and long term) is undoubtedly the
stock specific effect. The portfolio is concentrated with 25-35 names in general.
Rasmus Quist
Q1’s best performing stock was the US based semiconductor stock Intel which rose by more than 30 percent in Q1 adding a full percent to the overall excess return. This was Peter sen
followed by the US based auto producer General Motors Co. which yielded a net return of more than 40 percent adding another 0.7 percent to total excess return. Furthermore,
both Lowe’s and Tractor Supply Co. – two US based and US oriented retailers – each added nearly half a percentage point to excess return as they rose by roughly25 percent each.
Finally, not owning Apple yielded another half percent relatively speaking, as Apple fell by 4 percent in Q1 underperforming massively.
The worst stocks in the period was the Canadian retailier Alimentation Couche-Tard, which fell dramatically due to it’s plans of acquiring the French retailer Carrefour. The stock
fell more than 10 percent, addinga negative 0.7 percent to excess return. This was followed by the German jet engine manufacturer MTU Aero Engines, which fell 6 percent due to
profit takingas it was a very good performer last year. The effect was a negative 0.5 percent contribution to overall excess return for the period. Finally all three stocks Packaging
Corp of America, Ahold Delhaize Group and The Progressive Corp could not follow the bull market in value stocks, as they are considered “defensive” – and each yielded a negative
0.25 percent to excess return.Quarterly Commentary | March 2021
Changes to the portfolio
During this quarter the main changes to the portfolio was the complete sale of the US based recruitment company Robert Half International, as it looked stretched on multiples
due to a very strong H2 2020 rally. We consequently sold off.
Another company we chose to divest from, was the Canadian retailer Alimentation Couche-Tard. The company announced its intention to acquire the French retailer Carrefour at a
significant premium. We view this as a very bad move, and although the acquisition was outright cancelled, our trust in management was completelylost so we decided to exit the
position all together.
Finally, we decided to sell out remaining position in Goldman Sachs, following the strong performance of the stock and the obtained higher than normal valuation multiples.
Kurt Kara
During Q1 we have decided to initiate a position in Facebook. At the time of our acquisition, the company traded at an estimated 19 times earnings (adjusted for cash), which we
find very attractive. Facebook faces regulation, but at the current valuation levels, we believe the sum-of-the-parts is far above the market value, as WhatsApp as well as Oculus
and Instagram has not been fully monetarized yet.
Another new position for the portfolio is that of the Swiss based pharmaceutical company Roche which is strong in both oncology, cardiovascular as well as diagnostics. The
company trades at attractive multiples, and has a strong pipeline going forward.
Finally, we also initiated a position in Lenna Corp, which is a US based homebuilder. Lennar builds qualityentry level homes in the US and is a very strong business when lookingat
both balance sheet, profitability and growth. The stock was acquired at less than 7 times earnings and free cash flow which is very attractive.
Ulrik Jensen
Outlook
In 2021 focus will remain strong on whether or not the massive stimuli in the US will be inflationary or not. Currently, yield on 10 year US treasuries are up significantly, most
mostly so due to optimism regarding the economy. The markets are however increasingly focused on the effects of the massive programs by both Yellen and Powell, and as central
banks have been more soft on their views on inflation, the fear is now whether or not we will actuallysee a meaningful rise in CPI globally. This is further fueled by the view, that
most central banks will not be able to raise rates significantly as Debt to GDP ratios have skyrocketed globally. Hence the markets worry that we could end up in a situation with
rising inflationary pressure as well as low long term yields.
On an absolute basis the global stock markets have delivered high double digit returns in 2020 and unless the long term government yields continue to rise from here, we believe Rasmus Quist
Peter sen
that the outlook for 2021 would be positive to stocks in general. If however we see creeping inflation over the year, it would not bode well for tech and high P/E stocks. Value
stocks could thus continue to be the asset class of choice in the stock market.
As mentioned in previous reports, we do not expect growth stocks to continue to outperform massively over a long period of time. Perhaps that long streak of growth stocks’
excess return to value stocks are about to end, as Q1 2021 was very kind to value stocks in general. Time will show, but our long term view on value is, that it will again perform
better than both the market and so-called growth stocks.Disclaimer
Fondsmæglerselskabet Maj Invest A/S
Gammeltorv 18
1457 Copenhagen K
Denmark
Phone Direct +45 33 38 73 00
Fondsmæglerselskabet Maj Invest A/S
33 Cavendish Square
London, W1G 0PW
United Kingdom
Phone Direct +44 20 7 182 4025
Fax +44 20 7 182 4100
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