Group subsidiaries: economic vision, press releases, newsletters, interviews, etc.
Chahine Capital, 2024 report & 2025 outlook
16 January 2025
The document can be downloaded in PDF format at the top of the page, by clicking on the download icon.
After the downturn that began in October 2023, European and US equity markets continued to rise in 2024, buoyed by strong trends. At the end of December, the MSCI Europe NR posted a 2024 performance of +8.6% (EUR) and the MSCI USA NR +24.6% (USD).
Against this backdrop, all Digital Stars strategies outperformed over the year, benefiting from sustainable trends in several market segments that had been identified in advance.
Annualised performance of Digital Stars funds
Risk indicator: 5/7
Digital Stars Europe:
Throughout 2024, the fund benefited from good stock picking, supported by portfolio positioning in line with underlying market trends. The overweighting of financials and industrials, as well as the underweighting of consumer discretionary (particularly luxury goods) and consumer staples, contributed positively to the fund’s outperformance, echoing a favourable year for value and cyclical growth.
Digital Stars Continental Europe:
Like Digital Stars Europe, the fund benefited in 2024 from good stock picking, underpinned by portfolio positioning in line with underlying market trends. The overweighting of financials and industrials, as well as the underweighting of consumer discretionary (particularly luxury goods) and consumer staples, contributed positively to the fund’s outperformance, echoing a favourable year for value and cyclical growth.
Digital Stars Eurozone:
The fund benefited from a good selection of stocks throughout 2024, and a well-oriented positioning. The main individual contributors are to be found among finance, industry and technology. For the fund’s positioning, it was mainly the strong underweighting of the year’s three worst sectors that helped make the difference: consumer staples, energy (the fund’s reinforced ESG policy led to no stocks in this sector in 2024) and materials.
Digital Stars Europe Smaller Companies:
The year was marked by excellent stock picking for the fund, and a relatively neutral positioning versus the index. The best performance contributors were mainly financials and construction-related stocks. Conversely, specialised retail stocks penalised the strategy.
Digital Stars US Equities:
The year was marked by an excellent selection of stocks, which took particular advantage of the tense but decisive US election environment. Our technology stocks contributed most to outperforming the US market.
Focus on Digital Stars Europe
Throughout 2024, the fund benefited from a good stock picking, supported by a well-oriented positioning in value and cyclical growth styles. Finance was the winning sector of 2024, buoyed by a favourable interest-rate environment. The fund’s overweighting of financials worked in its favour, particularly Banks. Some of our banking and financial stocks have also benefited from a climate conducive to mergers/acquisitions, whether for real takeover operations or mere rumours (BPER, Banco de Sabadell, ANIMA Holdings, BPM). Industry is also one of the market’s winning sectors. Our overweight industrial stocks benefited from trends in Defence (Kongsberg) and Construction in the broadest sense (Konecranes, Prysmian). This construction theme was also reflected in strong contributions from cement manufacturers (Buzzi, Titan Cement). The good performance of the Consumer staples stocks in portfolio (Greencore) combined with our underweight in the sector made a very positive contribution in relative terms. On the other hand, Real Estate weighed on the fund’s performance, due to its overweight, as did IT.
The pro-cyclical environment of 2024 did not particularly favour Small caps, contrary to market expectations. However, despite our overweighting of Small and Mid caps, the strategy succeeded in outperforming all market segments, thanks to stock picking that took advantage of underlying market trends.
Digital Stars Europe performance attribution vs. MSCI Europe, by GICS sectors
Portfolio dynamics
Positioning of Digital Stars Europe vs. MSCI Europe
Dyn.* : Dynamic rebalancing over 6 months.
During the first half of the year, the model gradually reduced the allocation to value stocks, mainly Banks, in favour of Cyclical growth stocks. In the second half of the year, finance was reinforced in the portfolio rebalancings, but in a more balanced way between banking, Financial services and Insurance. The proportion of Value stocks is back in line with that of the index, while the underweighting of Quality/Visibility stocks has been reduced and the overweighting of Growth stocks reduced.
Breakdowns are not constant and change over time.
From a factorial perspective, the ‘Quality/Visibility’ style is generally the opposite of the ‘Value’, relatively to the market. Consequently, being underweight Quality/Visibility has enabled the fund to be positively sensitive to the Value trend that has dominated the market this year.
Sector wise, this stylistic positioning translates into a clear overweighting of the Financial and Industrial sectors, and an underweighting of Healthcare (especially Pharmaceuticals) and Consumer Staples.
The strong overweighting of Italy was maintained throughout the year, as was the significant underweighting of France. The UK was significantly reinforced in the second half of the year, and now represents the second-largest geographic overweight.
Finally, our Economic momentum indicator still places us in a pro-cyclical regime, a priori more favourable to Small- and Mid-cap stocks than to Large ones. The fund’s « All market-cap » selection was therefore still based on a logic of equal weighting of the stocks entering the portfolio in this market phase. This led to an allocation currently well spread-out across the entire spectrum of market caps. However, our Economic Momentum indicator is approaching its counter-cyclical tipping point, which could occur in the first half of 2025. This counter-cyclical shift would have the effect of attenuating the portfolio’s underweighting of the index’s largest caps, as remaining too underweight in giant caps would represent a major active risk in this type of macro-economic context.
Strong stylistic, sectoral and geographic trends benefited the Momentum factor as implemented in our Digital Stars strategies, which significantly outperformed over the year. We will now attempt to analyse the drivers which we believe will be decisive for the behaviour of the European and American Equity markets in the first half of the new year.
Heading for the final phase of the stock market expansion cycle?
2024 will remain a good year for equity indices (MSCI Europe NR +8.6%, MSCI USA NR +24.6%), and more importantly, will have marked a salutary break with the years -2023 dominated by a lack of visibility.
The main event of 2024 was the initiation of an accommodative monetary policy by Central Banks, in June for the ECB and September for the Fed, which had already been anticipated in the 2nd half of 2023, a sign of renewed macro-economic visibility.
The year 2025 looks set to be a pivotal one, during which investors’ gaze is likely to focus on the establishment of the Trump administration and its consequences for the global economy. Europe, with its low valuation and supported by rate cuts that are unlikely to weaken during the 1st half of the year, not seem to us to be devoid of opportunities for investors. As does the US market, where a majority of stocks remain fundamentally attractive.
More than ever in this changing context, we feel it is important to take a step back and rationally assess the situation in terms of our 4 traditional pillars of analysis.
Growth cycle still buoyant on both sides of the Atlantic for the time being
The first pillar of our analysis is Economic Momentum. Our proprietary Economic Momentum indicator, which is 12 months ahead of the real economy, remains at a high level in Europe, despite a slight consolidation since last Summer.
Source: Factset/Chahine Capital. Data as of 31/12/2024. Past performance is not indicative of future return. The Economic Momentum Indicator is a proprietary indicator that takes into account the latest releases of unemployment, retail sales, trade balance, GDP leading indicator, consumer confidence, PMI, economic confidence and industrial production.
In the US, our Economic Momentum indicator remains at a more neutral level than in Europe, while continuing to signal an expansive environment that should favour Equities.
Source: Factset/Chahine Capital. Data as of 31/12/2024. Past performance is not indicative of future return. The Economic Momentum Indicator is a proprietary indicator that takes into account the latest releases of unemployment, retail sales, trade balance, GDP leading indicator, consumer confidence, PMI, economic confidence and industrial production.
The environment therefore remains pro-cyclical, and the « Top-Down » consensus of economists expects robust growth in Europe and the USA over the next few years. While GDP growth in the Eurozone should reach +0.8% in 2024, an improvement is expected for 2025 (+1.0%) and 2026 (+1.2%). In the United States, although economists continue anticipate significant growth, the dynamic is less buoyant than in Europe.
This positive signal is likely to continue for several months yet. It should be remembered that the accommodative monetary pivots implemented by the major Central Banks since last June are the consequence of a positive phenomenon, that of winning the battle vs. inflation. This is in stark contrast to recent historical precedents, when accommodative measures were initiated to save a state in near-bankruptcy or rescue an exsanguinated financial sector. This is a finding that will support our next economic releases and our Economic Momentum indicator. The massive fiscal stimulus plan announced in China will also be a factor of support in the months ahead. However, we cannot rule out the possibility that this cyclical signal, which has been buoying Equities in Europe for 21 months now, will be reversed in the course of 2025. Since 2003, the longest expansive cycle as revealed by our indicator is 25 months (twice observed: July 2012 to August 2014, then November 2019 to December 2021).
More accommodative monetary policy in Europe than in the United States
As expected, the ECB and the Fed began their accommodative monetary pivot in autumn 2023. Rates were cut by 100 basis points on both sides of the Atlantic. The ECB should maintain this sustained pace in the first half of 2025 in order to bring its key rate close to 2.0%, close to the level of inflation. It is a different story in the US at this stage. Inflationary fears linked to the election of Donald Trump have led to a significant reassessment of the prospects for rate cuts. A single 25-basis-point cut in the US policy rate is now expected in the first half of the year, bringing it close to 4.25%. However, inflationary fears linked to Trump’s election seem exaggerated to us. Economic protectionism and fiscal accommodation are certainly inflationary, but that is forgetting the election promise to cut the price of oil by a factor of 2. On the other hand, we cannot rule out putting pressure on the Fed to adopt a more accommodative policy. A key rate of 4.25%, with US inflation currently at 2.7% (and a 1-year break-even inflation rate of 3.0%), means that real rates would be maintained at between 1.0% and +1.5% (vs. 0% in Europe), a level probably deemed too restrictive by the next US executives.
Attractive valuations in Europe, excessive for « traditional » American market-cap-weighted indices
The European market remains undervalued by historical standards. The prospective 12-month P/E of the STOXX Europe 600 index stands at 13.3x vs. a 14.0x average since 2000. This is even truer for the Small and Mid-cap segment (12.7x vs. average 14.7x).
Moreover, the bottom-up financial analyst consensus has stabilised over the past few months, highlighting a virtuous context for valuations at this stage: the « time effect » is once again favourable. Expected earnings growth over the next 12 months is +8.2% for the STOXX 600 index, which means that with a stable market, the P/E falls by 0.10 each month. Virtually, the P/E of the European index would be below 13.0x at the end of the half-year if the market were to remain at its current level.
The same cannot be said of the United States. Clearly, the valuation of the S&P 500 appears excessive. It stands at 21.6x, against a historical average of 16.7x, due to the index’s heavy concentration on overvalued stars. Interestingly, the « Equal weight » version of the S&P 500 is not overvalued (P/E 16.5x vs. average of 16.0x), while the « Small and Mid » segment is slightly under-priced by historical standards (MSCI USA Small Cap P/E +18.8x vs. average of 19.2x). The high valuation of the US market is therefore a trompe-l’oeil that needs to be put into perspective.
Stay invested for the coming months
After a rise of almost +70% in the US index and +40% in the European stock markets in just over 2 years, it may seem legitimate to question the sustainability of the current stock market rally. However, we believe that it is still too early to reduce strategic exposure to Equities.
Our Economic Momentum indicator continues to signal a favourable environment for Equities on both sides of the Atlantic. Monetary accommodation by the ECB, far more powerful than that anticipated for the Fed at this stage, is unlikely to falter, at least in the first half of the year. All the more so as the Fed may surprise. With the exception of the highly concentrated S&P 500 index, valuations do not reveal any excesses, or even an undervaluation of the Small and Mid-cap segment. Seasonality remains favourable until May.
A favourable context for the alpha of our active Momentum strategies
The Momentum factor has historically demonstrated its ability to generate outperformance over time horizons suited to equity investment.
This is due to Momentum’s ability to adapt to changing market environments.
Of course, the downside is that over shorter time horizons, Momentum can underperform, particularly during powerful stylistic regime shifts. This is what happened between 2020 and 2022 for the MSCI Europe Momentum index, following the European market’s profound stylistic shift towards Value. The good recovery of the factor since then is an excellent signal for its future prospects.
Momentum is not intended to be « timed« . However, it may be appropriate to take a long-term position on this factor after observing a significant relative drawdown.
Over a 5-year time horizon, corresponding to the recommended minimum investment horizon for Equities, it is extremely rare for the Momentum factor to underperform.
The Momentum implemented in our Digital Stars strategies feeds on trends. The longer these trends last, the better for our active investment approach.
In this respect, the installation of a new, disruptive administration in the United States should be seen as an opportunity and a potential source of alpha for our medium/long-term strategies.
Active bets adapted to the current context
For the coming months, we feel that the current relative positioning of our strategies is perfectly suited to the context and the current cyclical and fundamental analysis outlined above.
In Europe, the Digital Stars Europe fund currently adopts a relative pro-cyclical positioning, tending to be Value-oriented and overweight the Small and Mid caps segment.
Our top sector bet remains Finance. Banks are pro-cyclical in relative terms, and should continue to be buoyed by the further steepening of the yield curve, to which they are highly sensitive. Moreover, despite the sector’s sharp rise in 2024 (STOXX Europe Banque at +26.0% ex-dividends, best 2024 sector in Europe), it remains the cheapest sector on the European market, at a steep discount to its historical valuations (STOXX Europe Banque: PER 7.2x vs. a 10.4x average since 2000).
We also see the Value bias as a potential source of alpha in the months to come. It is the only fundamental style currently undervalued by historical standards, despite outperforming the Growth style significantly over the past 4 years.
Finally, the current Small- and Mid-cap bias is perfectly suited to an environment that remains pro-cyclical, in which a powerful accommodative monetary pivot is being implemented. All the more so as this segment of the European market remains significantly undervalued by historical standards.
It is also important to bear in mind that in the event of a switch to a contra-cyclical regime (not to be ruled out in 2025), the weighting of the Small and Mid-caps segment would be halved in our All-caps funds, following the new portfolio construction approach introduced in 2024.
Digital Stars US Equities: exposure to the US market while mitigating concentration risk
Our US investment solution combines a number of advantages. Of course, the depth of its investment universe (2700 stocks) and the high dispersion traditionally observed within it are conducive to Momentum stock-picking. Moreover, the portfolio’s equal weight approach enables investors to gain exposure to the US equity market, while sharply limiting the risk of concentration in a few overpriced stocks.
Investment Monthly Report
January 2025
9 January 2025
As every month, you can read our investment report, in which we offer you a macroeconomic analysis of the market, a presentation of the performance of our funds and their results.
You can also watch our video update on the Digital Funds range.
After the powerful rise observed in November following the US election, the traditional year-end rally did not extend into December (MSCI Europe NR -0.5%, MSCI USA NR -2.6%). Nevertheless, 2024 will remain a good year for equity indices (MSCI Europe NR +8.6%, MSCI USA NR +24.6%), and more importantly, will mark a salutary rupture with the years 2020-2023, dominated by a lack of visibility. The main event of 2024 was the initiation of an accommodating monetary policy by the central banks, in June for the ECB and in September for the Fed, which had already been anticipated in the second half of 2023, a sign of renewed macro-economic visibility. The year 2025 looks set to be a pivotal one, during which investors are likely to focus on the setting up of the Trump administration and its consequences for the global economy. Europe, with its low valuation and supported by rate cuts that are unlikely to weaken during the first half of the year, is not without strengths for investors.
Digital Stars Europe Acc posted a -0.1% decrease in December, outperforming by +0.4% the MSCI Europe NR. The fund ended the year 2024 up +14.5%, outperforming its index by +5.9%.
Throughout 2024, the fund benefited from its strong stock selection, supported by a well-oriented positioning. The overweighting of financials (BPER, Sabadell, Unipol Assicurazioni, 3i Group, etc.) and industrials (Kongsberg, Konecranes, Prysmian, etc.), together with the underweighting of consumer discretionary (especially luxury) and consumer staples, contributed positively to the fund’s outperformance, in line with a year favourable to value and cyclical growth. The portfolio reviews carried out in December were diversified, mainly increasing our positions in the consumer discretionary and healthcare sectors. Among the exits were mainly companies from the industry sector. Digital Stars Europe is significantly overweight financials and industrials, and underweight healthcare, consumer staples and consumer discretionary. The UK remains the fund’s top weight at 26.6%, ahead of Italy (biggest overweight) at 15.8% and Switzerland at 10.0%. With a 4.5% weight, France remains the largest country underweight.
Digital Stars Continental Europe Acc ended December at -0.7%, outperforming by +0.1% the MSCI Europe ex UK NR (-0.8%). The fund ended the year 2024 up +12.4%, outperforming its index by +6.0%.
During all year 2024, the fund benefited from its strong stock selection, supported by a well-oriented positioning. The overweighting of financials (BPER, Swissquote, BPM, etc.) and industrials (Kongsberg, Konecranes, MAIRE, etc.), together with the underweighting of consumer discretionary (especially luxury) and consumer staples, contributed positively to the fund’s outperformance, in line with a year favourable to value and cyclical growth. The portfolio reviews carried out in December were diversified, mainly increasing positions in finance and consumer discretionary. Among the exits were mainly stocks in the industry sector, as well as in communication services and real estate. Digital Stars Continental Europe is overweight in industry, finance and real estate, and underweight in consumer discretionary, IT, consumer staples and healthcare. Italy (first overweight) is still the fund’s top weight at 18.8%, ahead of Switzerland at 13.3% and Germany at 12.4%. With a 6.4% weight, France remains the largest country underweight.
Digital Stars Eurozone Acc achieved +1.5% in December, outperforming by +0.2% the MSCI EMU NR (+1.4%). The fund ended the year 2024 up +15.1%, outperforming its index by +5.6%.
The fund benefited from a strong stock selection throughout 2024, and from a well-oriented positioning. The main contributors were in finance (BPER, ANIMA Holdings), industry (Konecranes, Prysmian) and technology (SÜSS MicroTec, SAP). About the fund’s positioning, it was mainly the underweight of the three less-performing sectors of the year that made the difference: consumer staples, energy (the fund’s reinforced ESG policy led to the absence of stocks in this sector) and materials. The portfolio reviews carried out in December were marked by increased positions in the utilities and healthcare sectors. Among the outflows were mainly industrial and media stocks. Finance remains the fund’s main overweight, ahead of real estate, consumer discretionary, healthcare and IT. The fund is underweight in the consumer staples, materials and industry sectors. Italy becomes the largest country weight at 22.9%, followed by Germany at 20.5% and France at 19.8%. Italy remains the most overweight country, and France the most underweight.
Digital Stars Europe Smaller Companies Acc ended December at 0%, vs. -0.3% for the MSCI Europe Small Cap NR. The fund ended the year 2024 up +16.0%, outperforming its index by +10.4%.
The year was marked by an excellent stock selection in the fund and a relatively neutral positioning compared with the index. The biggest contributors to the year’s performance were mainly financials (BPER, CMC Markets) and construction-related stocks (Titan Cement, Heijmans, Buzzi, MAIRE, BAM Groep). On the other hand, specialised distribution stocks penalised the strategy. The portfolio reviews carried out in December were marked by increased positions in IT, consumer discretionary and materials. Among the outflows were mainly industrial, financial and real estate stocks. The portfolio is now mainly overweight in financials, healthcare and consumer staples, and underweight in consumer discretionary, real estate and technology. The UK remains the portfolio’s largest weighting at 28.7%, ahead of Sweden at 11.2% and Switzerland at 11.0%.
Digital Stars US Equities Acc USD ended December down -6.3%, vs. -2.6% for the MSCI USA NR and -7.8% for the MSCI USA Small Cap NR. The fund ended the year 2024 up +27.9%, significantly ahead of the MSCI USA NR at +24.6% and of the MSCI USA Small Cap NR at +11.6%.
In December, the FED’s announcement that the US rate cut would soon be terminated was followed by a sharp fall in US small and mid caps, wiping out two-thirds of November’s outperformance following Donald Trump’s election. With its “all-cap” profile, the fund was negatively impacted by this announcement, but continued to outperform in the post-election period. Year 2024 was shaped by an excellent stock selection for the fund, particularly in the technology sector, with the likes of AppLovin, NVIDIA, Palantir and, more recently, Arista Networks, DocuSign and Cloudflare. The latest monthly portfolio review mainly strengthened positions in the media, healthcare and real estate sectors, and reduced positions in consumer discretionary. The fund is overweight in finance and industry. The most underweight sectors remain IT, as well as consumer discretionary and energy.
Macro Update – January 2025
7 January 2025
Investment Monthly Report
December 2024
10 December 2024
As every month, you can read our investment report, in which we offer you a macroeconomic analysis of the market, a presentation of the performance of our funds and their results.
You can also watch our video update on the Digital Funds range.
The month of November, whose most significant event was Donald Trump’s victory in the US presidential election, proved highly volatile, particularly for European equity markets, which nonetheless ended slightly up (MSCI Europe NR +1.1%), but lagging behind US indices (MSCI USA NR +6.2%).
The frequency with which political news weighs on markets has clearly accelerated since the Lehman Brothers crisis. A source of short-term volatility, it is also a source of longer-term opportunities. Events often contradict a general feeling of “the moment”, tetanized by risk alone, and all too quickly sweep aside positive counterbalances. Who could have predicted in 2011 that by 2024 Greece would be financing itself on the same terms as France, or that Italy’s unemployment rate would be lower than Germany’s? In 2016, the reaction of the financial markets also contradicted the alarmist forecasts of some commentators during the Brexit vote, just as it did during Mr. Trump’s first accession to power.
Fundamental, cyclical and behavioural elements remain supportive at this stage, with a sustained economic momentum, an accommodating central bank pivot, attractive valuations in Europe and buoyant seasonality, all of which give reasons to hope that the stock market rally will continue in the coming months.
Digital Stars Europe Acc posted a +1.1% increase in November, in line with the MSCI Europe NR. The fund is up +14.6% since the beginning of the year, outperforming its index by +5.5%.
The fund’s sector positioning was favourable and enabled it to weather well the difficult post-election backdrop. In particular, the overweight of industrials and financials and the underweighting of healthcare, consumer staples and consumer discretionary, made a positive contribution in relative terms. But the strong performances of our financials (3i Group, Talanx, NatWest) and cement stocks (Heidelberg, CRH) contrasted with the declines in some other stocks, particularly certain semiconductor stocks which were hit hard by the US decision to ban all trade with Chinese chipmakers. The portfolio reviews carried out in November were diversified, mainly increasing our positions in the finance and consumer discretionary sectors. Among the exits were mainly companies from the IT and industry sectors. Digital Stars Europe is significantly overweight industrials and financials, and underweight healthcare, consumer staples and consumer discretionary. The UK has been significantly reinforced and remains the fund’s top weight at 25.5%, ahead of Italy (first overweight) at 15.3% and Germany at 10.8%. With a 5.0% weight, France remains the largest country underweight.
Digital Stars Continental Europe Acc ended November at +0.4%, outperforming by +0.3% the MSCI Europe ex UK NR (+0.1%). The fund is up +13.2% since the beginning of the year, outperforming its index by +5.9%.
The fund’s sector positioning was favourable and enabled it to weather well the difficult post-election backdrop. In particular, the overweight of industrials and real estate and the underweighting of consumer staples, consumer discretionary and healthcare, made a positive contribution in relative terms. But the strong performances of our financials (Swissquote, Talanx, Banco BPM) and cement stocks (Buzzi, Heidelberg, CRH) contrasted with the declines in some industrials (NKT, Nexans) and also certain semiconductors which were hit hard by the US decision to ban all trade with Chinese chipmakers. The portfolio reviews carried out in November were diversified, mainly increasing positions in finance. Among the exits were mainly stocks in the materials sector (chemicals and paper), as well as in industry and IT. Digital Stars Continental Europe is overweight in industrials and real estate, and underweight in healthcare, consumer discretionary, consumer staples and IT. Italy (first overweight) is still the fund’s top weight at 17.3%, ahead of Switzerland at 14.1% and Germany at 13.6%. With a 7.2% weight, France remains the largest country underweight.
Digital Stars Eurozone Acc achieved -0.3% in November, vs. +0.1% for the MSCI EMU NR. The fund is up +13.4% since the beginning of the year, outperforming its index by +5.4%.
The fund’s sector positioning was favourable: the overweighting of financials and the underweighting of technology and consumer staples practically offset the overweighting of small- and mid-cap stocks. The portfolio reviews carried out in November were marked by increased positions in the utilities and healthcare sectors. Among the outflows were mainly industrial and media stocks. Finance remains the fund’s main overweight, ahead of real estate, media, consumer discretionary and industrials. The fund is underweight in the consumer staples, utilities, materials and energy sectors. Germany represents the largest weighting at 22%, followed by Italy at 20.1% and France at 19.7%. Italy remains the most overweight country, and France the most underweight.
Digital Stars Europe Smaller Companies Acc ended November up +1.0%, vs. +1.2% for the MSCI Europe Small Cap NR. The fund is up +15.9% since the beginning of the year, outperforming its index by +10.0%.
The fund’s sector positioning was favourable: the overweighting of financials and the underweighting of technology and consumer discretionary virtually offset the overweighting of smaller stocks. The portfolio reviews carried out in November were marked by increased positions in materials and consumer discretionary. Among the outflows were mainly healthcare and industrial stocks. There was a net increase in exposure to the UK this month, bringing it back almost in line with the index. The portfolio is now mainly overweight in financials, healthcare and consumer staples, and underweight in consumer discretionary, real estate and technology. The UK remains the portfolio’s largest weighting at 29.1%, ahead of Sweden at 12.8% and Switzerland at 10.8%.
Digital Stars US Equities Acc USD ended November up +11.0%, outperforming both the MSCI USA NR at +6.2% and the MSCI USA Small Cap NR at +10.2%. The fund is up +36.5% since the beginning of the year, vs. +27.9% for the MSCI USA NR and +21.0% for the MSCI USA Small Cap NR.
The fund’s overweighting of small and mid-caps, as well as financial stocks, enabled it to benefit from the outcome of the US elections. In addition, strong earnings announcements from technology stocks such as AppLovin (+98% this month) enabled the fund to end November on a high note, outperforming its index by +4.8%, as well as the small and mid-cap segment. The fund remains overweighted in finance and industry. The most underweight sectors remain technology, media and energy.
Investment Monthly Report
November 2024
12 November 2024
As every month, you can read our investment report, in which we offer you a macroeconomic analysis of the market, a presentation of the performance of our funds and their results.
You can also watch our video update on the Digital Funds range.
The month of October was dominated by a rise in sovereign yields on all maturities over 1 year in the Eurozone, and over 6 months in the US, due to a polling Momentum favourable to Donald Trump in his race for the White House. His commercially protectionist and fiscally accommodating economic program could refuel inflation, which in the US remains above the Fed’s target (+2.5% vs. +2.0%). Against a bond market backdrop rather adverse for equities (MSCI Europe NR -3.3%) and particularly for small and mid caps (MSCI Europe Small Cap NR -4.5%), it was logically the Value style (-2.0%) that held up best in October in Europe. Furthermore, the quarterly publications for Q3 began in a rather favourable light for our strategies.
Digital Stars Europe Acc posted a -2.8% decrease in October, outperforming by +0.4% the MSCI Europe NR (-3.3%). The fund is up +13.4% since the beginning of the year, outperforming its index by +5.4%.
The fund’s sector positioning was favourable: the overweight in industry and finance and the underweight in consumer sectors more than offset the overweight in the real estate sector. The fund was little affected by the underperformance of small and mid caps, thanks in particular to an encouraging start to the publication season for stocks such as Kongsberg Gruppen, BCP or Trainline. The portfolio reviews carried out in October were diversified, mainly increasing our positions in the real estate and IT sectors. Among the exits were mainly companies from the finance and materials (chemicals) sectors. Digital Stars Europe is significantly overweight industrials, as well as financials and real estate. The fund is underweight healthcare, consumer discretionary and consumer staples. The UK has been reinforced and remains the fund’s top weight at 21.2%, ahead of Italy (first overweight) at 14.9% and Germany at 11.6%. With a 6.1% weight, France remains the largest country underweight.
Digital Stars Continental Europe Acc ended October at -2.8%, outperforming by +0.6% the MSCI Europe ex UK NR (-3.4%). The fund is up +12.7% since the beginning of the year, outperforming its index by +5.6%.
The fund’s sector exposure was favourable: the overweight in industry and finance and the underweight in IT and consumer sectors more than offset the overweight in real estate. The fund was little affected by the underperformance of small and mid caps, thanks in particular to an encouraging start to the publication season for stocks such as Kongsberg Gruppen, BCP, MTU Aero Engines and Sodexo. The portfolio reviews carried out in October were diversified, mainly increasing positions in communication services, IT and real estate. Among the exits were mainly stocks in the finance sector, as well as in consumer staples and energy sectors. Digital Stars Continental Europe is overweight in industrials, as well as in real estate, and underweight in healthcare, consumer discretionary, consumer staples and IT. Italy (first overweight) is still the fund’s top weight at 16.2%, ahead of Germany at 14.4% and Switzerland at 12.4%. With a 8.1% weight, France remains the largest country underweight.
Digital Stars Eurozone Acc achieved -3.0% in October, outperforming by +0.3% the MSCI EMU NR (-3.3%). The fund is up +13.7% since the beginning of the year, outperforming its index by +5.7%.
In October, the fund benefitted from its underweight positions in luxury goods and semi-conductors. The good performance of the financial sector made a particularly strong contribution to the fund’s outperformance, especially banks, which are well represented in the fund. Good publications from stocks such as Linea Directa Aseguradora and Erste Group Bank contrasted with other disappointing earnings announcements. The portfolio reviews out in October were marked by an increase in positions in the industry and IT sectors. Among the exits were mainly stocks from the consumer discretionary, telecommunications and media sectors. The finance sector becomes the fund’s main overweight, just ahead of real estate, media, consumer discretionary and industry. The fund is underweight in consumer staples, utilities, materials and energy. Germany represents the largest weight at 21.5%, followed by Italy at 19.4% and France at 19.2%. Italy remains the most overweight country and France the most underweight.
Digital Stars Europe Smaller Companies Acc ended October down -2.5%, outperforming by +2.1% the MSCI Europe Small Cap NR (-4.5%). The fund is up +14.8% since the beginning of the year, outperforming its index by +10.1%.
Against a backdrop of a sharp fall in small and mid caps during October, the strong performance of some of our holdings, such as Pharma Mar and BPER Banca, and our underweight in property, enabled the fund to finish +2.1% ahead of its benchmark. The portfolio reviews in September were marked by an increase in positions in the consumer staples and energy sectors. Among the exits were mainly materials and consumer discretionary stocks. The portfolio is now mainly overweight in finance, healthcare and industry, and underweight in consumer discretionary, real estate, materials and IT. The UK (the most underweight country) remains the portfolio’s largest weighting at 25.7%, ahead of Sweden at 13.9% and Switzerland at 12.2% (the most overweight countries).
Digital Stars US Equities Acc USD ended October up +0.8%, outperforming both the MSCI USA NR at -0.8% and the MSCI USA Small Cap NR at -0.8%. The fund is up +23.0% since the beginning of the year, vs. +20.4% for the MSCI USA NR and +9.8% for the MSCI USA Small Cap NR.
The overweighting of banks and the excellent performance of our technology stocks (AppLovin, Palantir Technologies, DocuSign, etc.) enabled the fund to end October on a strong note, outperforming its indices by 1.5%. The latest monthly portfolio review mainly strengthened positions in finance, IT and consumer discretionary sectors, and reduced positions in industry. The fund is significantly overweight in industry and finance. The most underweight sectors remain IT and media.
Is quantitative investment necessarily a « black box »?
30 October 2024
Is quantitative investment necessarily a « black box »?
Analysis by Charles Lacroix, CEO of Chahine Capital for H24 Finance.
Despite a history spanning several decades and a significant place in the portfolios of Anglo-Saxon institutional and retail investors, quantitative investment is still relatively marginal in the allocations of their European counterparts, even though it has been gaining ground in recent years.
Indeed, quantitative investment, with its systematic, disciplined approach based on pre-defined investment rules and limits, and its ability to exploit vast quantities of data, seems increasingly well suited to a world where, for many players, too much information now kills information…
And yet, when the teams at Chahine Capital, who have been implementing a systematic “Momentum” equity strategy for over 25 years, talk to investors, we often hear the term “black box” thrown around.
How can we explain this discrepancy between some investor’s perception of quantitative investment and what it actually is?
There are several possible explanations:
1) A multi-factorial approach sometimes difficult to grasp for the non-specialist
The added value of quantitative investing lies in the identification and exploitation of proven factors or risk premia whose persistence has been demonstrated both academically and empirically (“Growth”, “Value”, “Momentum”, “Quality”, “Low Volatility”, “Carry”, to name but a few).
To improve the robustness of their strategy, and given that no single factor works all the time, however attractive it may be over the long term (think of the “Value” factor between 2007 and 2021, i.e. for almost 14 years!), many quant investment managers will tend to diversify the risk of their overall portfolio by aggregating different factors or risk premia.
The disadvantage for the non-specialist investor is that, while he or she may be able to understand how each of these factors works in isolation, it will be very difficult to grasp their interactions and, above all, to anticipate how a multi-factor portfolio will behave in a given market scenario.
One of the strengths of the Momentum factor, which consists in identifying and exploiting the persistence of upward trends in certain stocks, is its adaptability to different market regimes: it simply goes where the market goes, without any structural sector or style bias. As such, it is probably one of the only factors that can be efficiently implemented on its own, making it easy to understand, even for investors who are not specialists in quantitative matters.
2) More or less intuitive factors
While some factors, such as Momentum, are highly intuitive, for the reasons outlined above, others, such as Low Volatility or certain risk premia, such as Carry trade, can be more difficult to pin down.
The determinants of a Momentum strategy’s performance potential are easy to grasp: a visible environment will favor the emergence of trends, while repeated geopolitical shocks or emergency interventions by Central Banks will probably cause the market to temporarily forget fundamentals, or lead to damaging sector rotations.
Conversely, the sudden increase in volatility on a currency pair (e.g. Yen-GBP), which is costly for a FX carry strategy, may have escaped the investor’s notice if his eyes are not permanently riveted to his Bloomberg© screen, making it more difficult for him to judge its suitability for a given market scenario.
3) A varying degree of transparency
While the disciplined and rigorous application of clear, pre-established rules greatly facilitates the transparency that most investors demand, and objectifies investment decisions to a greater extent than discretionary investment managers can, it must be admitted that some systematic managers are reluctant to go into detail about the strategies they implement, or to disclose their portfolios at regular intervals.
There’s probably a touch of paranoia behind this reflex: “If I say too much, some competitors might be tempted to copy me, and I risk losing my competitive edge”. Nevertheless, the indispensable and costly human resources, in the form of highly specialized researchers, and material resources, in the form of investment in data and IT tools, create strong barriers to entry, leading us to believe that this “risk” is greatly overestimated by the quantitative investment industry.
On the contrary, many systematic managers, among which Chahine Capital, have chosen to draw on their expertise in analysis and information retrieval to offer greater transparency on their strategies, ongoing research and results, in order to eliminate any surprise effect for their investors. This makes it much easier for investors to report the results of systematic strategies to their end-clients.
4) “White-box” quantitative investment
In conclusion, the prejudice against “black box” quantitative investment seems to us to be mostly unjustified. Provided that it is implemented using readable, intuitive factors, and that systematic investment managers are sufficiently didactic and comply with the now indispensable exercise of transparency, it seems to us to be the best illustration of Nicolas Boileau’s famous maxim (1636-1711): “What is well conceived is clearly stated, and the words to say it come easily”. In short, the very definition of “white box” investment…
Investment Monthly Report
October 2024
10 October 2024
As every month, you can read our investment report, in which we offer you a macroeconomic analysis of the market, a presentation of the performance of our funds and their results.
You can also watch our video update on the Digital Funds range.
September proved to be a rather neutral month for the equity asset class. European equities fell slightly (MSCI Europe NR -0.4%), but this was not the case for small and mid caps (+0.5% for the MSCI Europe Small NR), and US equities progressed (MSCI USA NR +2.1%) with the dollar falling against the euro. The first half of the month was bearish. A logical observation after the strong bullish sequence observed throughout August, a bullish sequence that needed to be digested. The second half of the month was of a completely different nature, and offset the sluggish start seen at the beginning of the month. The announcement of the Fed’s first rate cut of 50 basis points, together with the stimulus plans announced in China, provided powerful support for the equity asset class at the end of the month.
Digital Stars Europe Acc posted a +0.7% increase in September, outperforming by +1.1% the MSCI Europe NR (-0.4%). The fund is up +16.7% since the beginning of the year, outperforming its index by +5.1%.
The fund’s pro-cyclical positioning (overweight small and mid caps) has been favourable. The fund’s sector positioning as well, thanks in particular to our two biggest bets: the overweight position in industry and the underweight position in healthcare. Some stocks particularly stood out, such as SÜSS MicroTec (semi-conductors) and Sectra (healthcare technology). The portfolio reviews carried out in September were diversified, mainly increasing our positions in the telecom sector, as well as in healthcare and consumer discretionary. Among the exits were mainly companies from consumer staples (food) and materials sectors. Digital Stars Europe is significantly overweight industrials and financials. The fund is underweight healthcare, consumer discretionary and consumer staples. The UK remains the fund’s top weight at 18.3%, ahead of Italy (first overweight) at 15.3% and Germany at 11.7%. With 5.4%, France remains the largest country underweight.
Digital Stars Continental Europe Acc ended September at +0.6%, outperforming by +1.0% the MSCI Europe ex UK NR (-0.4%). The fund is up +15.9% since the beginning of the year, outperforming its index by +5.1%.
The fund’s pro-cyclical positioning (overweight small and mid caps) has been favourable. The fund’s sector positioning as well, thanks in particular to our three biggest bets: the overweight positions in industry and real estate and the underweight position in healthcare. Some stocks particularly stood out, such as SÜSS MicroTec (semi-conductors) and Sectra (healthcare technology). The portfolio reviews out in September were diversified, mainly increasing positions in industrials and real estate. Among the exits were mainly stocks in the IT sector, as well as in consumer discretionary and materials sectors. Digital Stars Continental Europe is overweight in industrials, as well as in real estate, and underweight in healthcare, consumer discretionary, IT and consumer staples. Italy (first overweight) is still the fund’s top weight, but has been reduced to 15.8%, ahead of Germany at 14.8% and Sweden at 13.7%.
Digital Stars Eurozone Acc achieved +1.7% in September, outperforming by +0.7% the MSCI EMU NR (+1.0%). The fund is up +17.2% since the beginning of the year, outperforming its index by +5.5%.
The fund’s pro-cyclical positioning (overweight small and mid caps) has been favourable. The fund’s sector positioning as well, thanks in particular to three big bets: the overweight in real estate and the underweight in technology and energy. A few stocks stood out in particular, such as SÜSS MicroTec (semiconductors) and CECONOMY (technology). The portfolio reviews out in September were marked by an increase in positions in the financials and utilities sectors. Among the outflows were mainly stocks from the consumer discretionary, industry and paper sectors. The finance sector becomes the fund’s main overweight, just ahead of real estate, followed by consumer discretionary and media. The fund is underweight in consumer staples, materials and energy. Germany becomes the top weighting at 20.9%, followed by France at 19.9% and Italy at 17.8%. Italy remains the most overweight country, and France the most underweight.
Digital Stars Europe Smaller Companies Acc ended September up +0.1%, vs. +0.5% for the MSCI Europe Small Cap NR. The fund is up +17.7% since the beginning of the year, outperforming its index by +8.1%.
The strong gains in some of our holdings, such as SÜSS MicroTec and Titan Cement, and the fund’s good positioning in energy, were offset by the underweight in real estate, as well as by the underperformance of IMMOFINANZ (real estate). The portfolio reviews in September were marked by an increase in positions in the financials and energy sectors. Among the outflows were mainly industrial stocks. The portfolio is now mainly overweight in financials, healthcare and industrials, and underweight in real estate, consumer discretionary and technology. The UK (the most underweight country) remains the portfolio’s largest weighting at 25.6%, ahead of Sweden at 15.7% (the most overweight country) and Switzerland at 8.8%.
Digital Stars US Equities Acc USD ended September up +2.3%, outperforming both the MSCI USA NR at +2.1% and the MSCI USA Small Cap NR at +1.3%. The fund is up +22.0% since the beginning of the year, vs. +21.3% for the MSCI USA NR and +10.7% for the MSCI USA Small Cap NR.
A good stock selection enabled the fund to finish September ahead of its benchmark index, despite the underperformance of small and mid-cap stocks currently overweighted in the portfolio. The latest monthly portfolio review mainly strengthened positions in media and healthcare, and reduced positions in consumer discretionary, energy and financials. The fund is heavily overweighted in industry and finance. The most underweight sectors remain technology and media.
Macro update – October 2024
10 October 2024
Investment Monthly Report
September 2024
6 September 2024
As every month, you can read our investment report, in which we offer you a macroeconomic analysis of the market, a presentation of the performance of our funds and their results.
You can also watch our video update on the Digital Funds range.
The summer was dominated by an upsurge in volatility. In the first days of August, a combination of adverse factors of various kinds led to a significant decline in equity indices. Poor economic data from the US and China, a liquidity squeeze following the BoJ’s rate hike, and geopolitical risk premium tensions – all these factors, at a time of year when volumes are traditionally low, weighed on equity indices at their all-time highs. However, the strength of the subsequent rebound enabled indices to end the month up (MSCI Europe NR +1.6%, MSCI USA NR +2.4%). This V-shaped recovery is reassuring, and tells investors a lot about the strength of the market and its micro and macro-economic fundamentals.
Following a +3.6% rise in July (+2.4% in relative terms), Digital Stars Europe Acc posted a +0.3% increase in August, compared with +1.6% for the MSCI Europe NR. The fund is up +15.9% since the beginning of the year, outperforming its index by +3.8%. Over the course of the month, the fund gradually made up some of the ground lost in the early days of August, following a defensive market movement exacerbated by the summer context. This catching-up took place thanks to stocks in a wide variety of sectors, such as Ferrari, Talanx, ALK-abello, Keller and Lotus Bakeries. The portfolio reviews carried out in August were diversified, mainly increasing our positions in the finance sector, as well as in utilities and healthcare. Among the exits were mainly in the consumer discretionary, consumer staples and industrial sectors. Digital Stars Europe is significantly overweight industrials and financials. The fund is underweight healthcare, consumer discretionary and consumer staples. The UK remains the fund’s top weight at 17.9%, ahead of Italy (first overweight) at 15.6% and Germany at 10.3%.
After a rise of +2.7% in July (+2.1% in relative terms), Digital Stars Continental Europe Acc ended August at +0.8%, vs. +1.8% for the MSCI Europe ex UK NR. The fund is up +15.2% since the beginning of the year, outperforming its index by +3.9%. Over the course of the month, the fund gradually made up some of the ground lost in the early days of August, following a defensive market movement exacerbated by the summer context and unfavourable to our stock-picking. This catching-up was achieved thanks to stocks in very different sectors, such as ALK-abello, Ferrari, Lotus Bakeries and Talanx. The portfolio reviews out in August were diversified, mainly increasing positions in healthcare, real estate and finance. Among the exits were mainly stocks in the consumer discretionary and basic materials sectors (metals, chemicals and paper). Digital Stars Continental Europe is overweight in industrials and real estate, and underweight in healthcare, consumer discretionary and consumer staples. Italy (first overweight) is still the fund’s top weight at 17.3%, ahead of Sweden and Germany at 13.4%.
After a +2.3% rise in July (+1.9% on a relative basis), Digital Stars Eurozone Acc achieved -0.1% in August, compared with +1.6% for the MSCI EMU NR. The fund is up +15.2% since the beginning of the year, outperforming its index by +4.7%. Over the course of the month, the fund gradually made up some of the ground lost in the early days of August, following a defensive market movement exacerbated by the summer context and unfavourable to our stock-picking. This catching-up was achieved thanks to stocks in very different sectors, such as Vonovia, Sogefi, Hornbach and Aena. The portfolio reviews in August were marked by an increase in positions in the finance, real estate and healthcare sectors. Among the exits were mainly technology stocks in the service and semiconductor sectors. Real estate remains the fund’s main overweight, ahead of consumer discretionary, media and finance. The fund is underweight in consumer staples, utilities, energy and technology. France remains the top weighting at 21.0%, followed by Germany at 20.3% and Italy at 18.3%. Italy remains the most overweighted country, and France the most underweighted.
After a +3.9% rise in July (-0.4% in relative terms), Digital Stars Europe Smaller Companies Acc ended August up +1.6%, outperforming the MSCI Europe Small Cap NR (-0.3%) by +1.9%. The fund is up +17.6% since the beginning of the year, outperforming its index by +8.5%. Over the course of the month, the fund more than made up the ground lost in the early days of August, following a defensive market movement exacerbated by the summer context and initially unfavourable to our stock-picking. This catch-up was achieved thanks to stocks in a wide variety of sectors, such as Ambea, Keller, Hoist Finance, IMMOFINANZ and Lotus Bakeries. The portfolio reviews in August were marked by an increase in positions in the finance and healthcare sectors, particularly in the UK. Among the outflows were mainly consumer discretionary and energy stocks, and mainly Italian stocks. The portfolio is now mainly overweight in industrials, finance and healthcare, and underweight in real estate, consumer discretionary, energy and technology. The United Kingdom (the most underweight country) remains the portfolio’s largest weighting at 24.3%, ahead of Sweden at 15.8% (the second most overweight country behind Finland) and Switzerland at 8.0%.
Following a +6.9% rise in July (+5.7% on a relative basis), Digital Stars US Equities Acc USD ended August up +1.9%, versus +2.4% for the MSCI USA NR and -0.4% for the MSCI USA Small Cap NR. The fund is up +19.2% since the beginning of the year, versus +18.8% for the MSCI USA NR and +9.2% for the MSCI USA Small Cap NR. August was marked by the underperformance of small and mid-cap stocks, despite the poor performance of GAFAMs. The fund was more affected by the former than the latter. Against this backdrop, good earnings announcements from stocks such as SharkNinja and Crexendo enabled the fund to come close to outperforming its index. The latest monthly portfolio review mainly strengthened positions in financials, and sharply reduced positions in consumer discretionary, bringing the fund back in line with its benchmark index. The fund is heavily overweighted in industry and finance. The most underweight sectors are technology and media.
Investment Monthly Report
August 2024
8 August 2024
As every month, you can read our investment report, in which we offer you a macroeconomic analysis of the market, a presentation of the performance of our funds and their results.
You can also watch our video update on the Digital Funds range.
The positive inflation figures published in July on both sides of the Atlantic, the fall in inflation expectations and the encouraging start of quarterly publications helped the indices to gain ground over the month (MSCI Europe NR +1.2%, MSCI USA NR +1.2%). The Fed’s accommodative stance is now assured for September, while the ECB already set this virtuous process in motion in June by cutting its key rates by 25 basis points. In this environment dominated by monetary news, it was logically small and mid caps that stood out in July, especially as these stocks are significantly discounted both in absolute terms and relatively to their historical standards. The MSCI Europe Small NR rose by +4.3% and the MSCI USA Small NR by +7.7% over the month.
Digital Stars Europe Acc posted a monthly performance of +3.6%, outperforming by +2.4% the MSCI Europe NR (+1.2%). The fund is up +15.6% YTD, beating its index by +5.3%. The fund was supported by the small and mid caps rally, but also by its exposure to industrials (Kongsberg, Konecranes, Munters Group), its underweighting of consumer discretionary and the good performance of its financial stocks (BPER, BCP, NatWest). However, the fund was slightly penalised by its underexposure to defensive stocks. The portfolio reviews carried out in July were diversified, increasing mainly our positions in the finance sector, as well as in utilities and industry. Among the exits were mainly consumer discretionary stocks, as well as energy, IT and healthcare stocks. Digital Stars Europe is significantly overweight industry. The fund is underweight healthcare, consumer discretionary and consumer staples. The UK becomes the fund’s largest weight at 17.3%, ahead of Italy (largest overweight) at 16.4% and Germany at 10.6%.
Digital Stars Continental Europe Acc ended July at +2.7%, outperforming by +2.1% the MSCI Europe ex UK NR (+0.6%). The fund is up +14.3% YTD, beating its index by +5.0%. The fund was supported by the small and mid caps rally, but also by its exposure to industrials (Kongsberg, Konecranes, Munters Group), its underweighting of consumer discretionary and the good performance of its financial stocks (BPER, BAWAG, Piraeus Financial Holdings). However, the underweight in defensive stocks and the positions in chemicals slightly penalised the fund. The portfolio reviews carried out in July were diversified, increasing mainly our positions in finance, as well as in chemicals and media. Among the exits were mainly IT and consumer discretionary stocks. Digital Stars Continental Europe is overweight in industry, as well as in real estate. The fund is underweight healthcare and consumer staples. Italy (largest overweight) is still the fund’s top weight at 18.5%, ahead of Germany at 13.2% and Sweden at 10.1%.
Digital Stars Eurozone Acc posted a monthly performance of +2.3%, outperforming by +1.9% the MSCI EMU NR (+0.4%). The fund is up +15.4% YTD, beating its index by +6.6%. The fund was supported by the small and mid caps rally, but was slightly penalised by its underweight position in defensive stocks. The good performance of our semiconductor stocks (notably SÜSS MicroTec at +2.3% vs. -11.6% for ASML), as well as good earnings announcements (Konecranes, ATOSS Software, etc.) enabled the fund to outperform its index. The portfolio reviews carried out in July saw the integration of stocks in the finance, industry and healthcare sectors. On the outgoing side, the media and semiconductor sectors. Real estate becomes the largest sector overweight, ahead of consumer discretionary and media. The fund is underweight in consumer staples, utilities, energy and healthcare. France remains the largest country weight at 19.7%, followed by Italy at 18.5% and Germany at 18.4%. Italy remains the fund’s most overweight country, and France the most underweight.
Digital Stars Europe Smaller Companies Acc ended up at +3.9% in July, vs. +4.3% for the MSCI Europe Small Cap NR. The fund is up +15.7% YTD, beating its index by +6.3%. The fund benefited from the small and mid caps rally, but suffered from its underweight position in the UK, partially offset by positive earnings publications (Koninklijke Heijmans, Hoist Finance…). The monthly portfolio reviews have strengthened our positions in the finance, healthcare and industry sectors. Sales occurred mainly in IT and consumer staples sectors. The weight of the UK was significantly increased. The portfolio is now mainly overweight in industry, finance and healthcare, and underweight in IT, real estate and consumer discretionary. The UK (largest underweight) remains the largest country weight at 22.1%, ahead of Sweden at 16.0% and Italy (most overweight country) at 12.2%.
Digital Stars US Equities Acc USD ended up at +6.9% in July, outperforming by +5.7% the MSCI USA NR, but behind the MSCI USA Small Cap NR (+7.7%). The fund is up +17.0% YTD, vs. +16.1% for its index and +9.6% for the MSCI USA Small Cap NR. July was a strong catch-up month for US small and mid caps. This rally benefited the fund, which was heavily underweight GAFAM. The overweight position in the financials sector, particularly in US regional banks, also contributed to the fund’s good performance. The latest monthly portfolio review mainly increased the positions in the healthcare, IT and finance sectors, and reduced mainly those consumer discretionary, energy and materials sectors. The portfolio is significantly overweight in consumer discretionary and industry, as well as in finance. The most underweight sectors are IT and media.
Investment Monthly Report
July 2024
8 July 2024
As every month, you can read our investment report, in which we offer you a macroeconomic analysis of the market, a presentation of the performance of our funds and their results.
You can also watch our video update on the Digital Funds range.
The blow of the dissolution of the French National Assembly mainly weighed on French stocks (MSCI France NR -6.3% in June), and more modestly on European indices (MSCI Europe NR -1.0%). US indices, meanwhile, continued to rise (MSCI USA NR +3.5%). Is this troubled electoral context likely to throw the global economy off course? In our view, this is unlikely. On the one hand, previous election-related shocks have not had a lasting impact on the trend, as was the case with the election of Donald Trump, the Brexit vote or the rise to power of populist parties in Europe. Furthermore, the scenario in France of an absolute majority for a coalition of the « extremes » seems to be receding, as is the risk of a budgetary breakdown in the Eurozone’s 2nd largest economy. Fundamentals should therefore once again support the equity asset class, once the economic turmoil has passed. The global economic momentum remains robust, the Fed is poised to cut interest rates in the wake of the ECB, and valuations remain attractive, both in Europe and in the United States for most stocks, while the earnings momentum is currently positive.
Digital Stars Europe Acc posted a monthly performance of -2.1%, vs. -1.0% for the MSCI Europe NR. The fund is up +11.6% YTD, beating its index by +2.5%. Technology (ASM Int’l, SÜSS MicroTec, BESI, SAP, ASML) and healthcare (UCB, Ypsomed) were the only two positive sectors this month, both in the fund and in the market, but their underweight and our remaining cyclical positioning penalised the fund in relative terms. The troubled electoral environment weighed on all the small and mid caps, which are currently well represented in the portfolio. The portfolio reviews carried out in June were diversified, increasing significantly our positions in the consumer staples and discretionary sectors, as well as in IT. Among the exits were mainly energy stocks, as well as healthcare and media stocks. France, already heavily underweight, has seen its weight further reduced. Digital Stars Europe is significantly overweight industry. The fund is underweight healthcare, consumer discretionary and consumer staples. Italy (largest overweight) remains the fund’s top weight at 16.0%, ahead of the UK at 15.3% and Germany at 10.4%.
Digital Stars Continental Europe Acc ended June at -2.3%, vs. -1.1% for the MSCI Europe ex UK NR. The fund is up +11.3% YTD, beating its index by +2.6%. Technology (ASM Int’l, SÜSS MicroTec, BESI, SAP, ASML) and healthcare (UCB) were the only two positive sectors this month, both in the fund and in the market, but their underweight and our remaining cyclical positioning penalised the fund in relative terms. The troubled electoral environment weighed on all the small and mid caps, which are currently well represented in the portfolio. The portfolio reviews carried out in June were diversified, increasing significantly our positions in consumer staples and discretionary, as well as in industrials. Among the exits were mainly energy stocks, as well as healthcare and media stocks. France, already heavily underweight, has seen its weight further reduced. Digital Stars Continental Europe is overweight in industry, as well as in real estate. The fund is underweight healthcare and consumer staples. Italy (largest overweight) is still the fund’s top weight at 18.1%, ahead of Germany at 13.3% and Sweden at 10.6%.
Digital Stars Eurozone Acc posted a monthly performance of -3.2%, vs. -2.5% for the MSCI EMU NR. The fund is up +12.8% YTD, beating its index by +4.5%. The fund suffered from its ‘all-cap’ positioning, partially offset by its underweight positions in France and energy. The portfolio reviews carried out in June saw the integration of finance stocks, as well as materials. On the outgoing side, the media and consumer discretionary sectors. The media sector remains the largest overweight, ahead of consumer discretionary and real estate. The fund is underweight in consumer staples, utilities, energy and healthcare. France remains the largest country weight at 21.3%, followed by Italy at 19.4% and Germany at 18.0%. Italy remains the fund’s most overweight country, and Germany the most underweight with France.
Digital Stars Europe Smaller Companies Acc ended up at -1.6% in June, outperforming by +1.8% the MSCI Europe Small Cap NR (at -3.3%). The fund is up +11.4% YTD, beating its index by +6.4%. Positive publications from several of our stocks (XPS Pensions Group, CMC Markets) enabled the fund to outperform the index, despite a few disappointments. The monthly portfolio reviews have strengthened our positions in the finance and healthcare sectors. Sales occurred mainly in materials and real estate sectors. The weight of Sweden was significantly reduced. The portfolio is now mainly overweight in industrials, IT and healthcare, and underweight in finance, real estate and consumer discretionary. The UK (largest underweight) becomes the largest country weight at 17.4%, ahead of Sweden at 15.8% and Italy (most underweight country) at 12.5%.
Digital Stars US Equities Acc USD ended up at -1.4% in June, vs. +3.5% for the MSCI USA NR and -1.3% for the MSCI USA Small Cap NR. The fund is up +9.5% YTD, vs. +14.6% for its index and +1.8% for the MSCI USA Small Cap NR. The excellent performance of the “Magnificent 7” buoyed the index, accounting for most of the fund’s underperformance. The latest monthly portfolio review mainly increased the positions in the real estate, energy and materials sectors, and reduced mainly those consumer discretionary and finance sectors. The portfolio is significantly overweight in consumer discretionary and industry, as well as in finance. The most underweight sectors are IT, media and healthcare.
Macro update – July 2024
3 July 2024
Investment Monthly Report
May 2024
10 June 2024
Numerous macro and microeconomic tailwinds supported the equity markets in May (MSCI Europe NR +3.3%, MSCI USA NR +4.7%). Good earnings reports reassured investors and highlighted the attractive valuations in Europe and the United States for the vast majority of listed companies. In addition, the drop in oil prices in May led to a fall in inflation expectations on both sides of the Atlantic, reinforcing the central scenario of an imminent rate cut by the ECB, before the Fed follows suit in September. Even if seasonality becomes less buoyant, it still seems premature to reduce equity exposure and may even be costly to stay away from equity markets, despite the recent rise in equity indices. All the more so as some market segments (small and mid caps) have been lagging significantly for many months, leading to a valuation discount, and this could support the prospects for the relative performance of our active ‘Momentum’ Digital Stars strategy.
Digital Stars Europe Acc posted a monthly performance of +5.1%, outperforming by +1.8% the MSCI Europe NR (+3.3%). The fund is up +14.0% YTD, beating its index by +3.8%. Our overweight positions in industry and finance helped the fund this month, as did our underweight position in consumer discretionary (particularly luxury goods). More importantly, however, it was the good earnings reports from many of our companies (Buzzi, Prysmian, Indra Sistemas, Camurus) that enabled us to widen the gap, despite a few disappointments.
The portfolio reviews carried out in May were diversified, increasing significantly our positions in the industry, as well as in the consumer discretionary sectors. Among the exits were mainly finance, IT and real estate stocks. The weight of Sweden was significantly decreased.
Digital Stars Europe is significantly overweight industry, and slightly overweight finance and real estate. The fund is underweight healthcare, consumer staples and consumer discretionary.
Italy (largest overweight) remains the fund’s top weight at 16.9%, ahead of the UK at 15.2% and Germany at 8.0%.
Digital Stars Continental Europe Acc ended May at +5.3%, outperforming by +1.6% the MSCI Europe ex UK NR (+3.6%). The fund is up +13.9% YTD, beating its index by +4.0%. Our overweight position in industry helped the fund this month, as did our underweight position in consumer discretionary (particularly luxury goods). More importantly, however, it was the good earnings reports from many of our companies (Buzzi, ALK-abello, Camurus, Prysmian, Indra Sistemas) that enabled us to widen the gap, despite a few disappointments.
The portfolio reviews carried out in May were diversified, increasing significantly our positions in industry, as well as in materials. Among the exits were mainly stocks in the finance, real estate and IT sectors. The weight of Sweden was significantly decreased.
Digital Stars Continental Europe is overweight in industry, as well as in real estate. The fund is underweight healthcare, consumer staples and consumer discretionary.
Italy (largest overweight) is still the fund’s top weight at 18.7%, ahead of Germany and Sweden at 11.4%.
Digital Stars Eurozone Acc posted a monthly performance of +5.4%, outperforming by +2.6% the MSCI EMU NR (+2.7%). The fund is up +16.5% YTD, beating its index by +5.4%. The fund benefited from its all-cap positioning and from its underweight in energy. The underweight in luxury goods also helped, thanks in particular to the underperformance of LVMH, absent from the portfolio. More importantly, however, it was the good earnings publications from some of our stocks (SÜSS MicroTec, Prysmian, ANIMA HoldingIndra Sistemas, Camurus) that enabled us to widen the gap.
The rebalancing carried out in May saw the integration of IT stocks, as well as materials and media. On the outgoing side, the consumer discretionary, finance and industry sectors.
The media sector becomes the largest overweight, ahead of consumer discretionary and real estate. The fund is underweight in consumer staples, utilities, energy and healthcare.
France remains the largest country weight at 26.0%, followed by Italy at 20.0% and Germany at 15.5%. Italy remains the fund’s most overweight country, and Germany the most underweight with of France.
Digital Stars Europe Smaller Companies Acc ended up +6.1% in May, outperforming by +0.2% the MSCI Europe Small Cap NR (+5.8%). The fund is up +13.2% YTD, beating its index by +4.5%. Positive publications from several of our stocks (Ambea, SÜSS MicroTec, Buzzi, Heijmans) enabled the fund to outperform the index, despite a few disappointments.
The monthly portfolio reviews have strengthened our positions in the IT and healthcare sectors. Sales occurred mainly in consumer discretionary sector. The weight of Italy was significantly decreased.
The portfolio is now mainly overweight in industrials and IT, and underweight in finance, real estate and consumer discretionary.
Sweden (one of the two most overweight countries, along with Italy) is still the biggest country weight in the portfolio and weighs 17.6%, ahead of the UK (most underweight country) at 17.3% and Italy at 12.6%.
Digital Stars US Equities Acc USD was up +6.5% in May, outperforming by +1.8% both the MSCI USA NR (+4.7%) and the MSCI USA Small Cap NR (+4.7%). The fund is up +11.0% YTD, beating its index by +0.3%. Positive publications from several of our stocks (Abercrombie & Fitch, Gap, AppLovin, SEMrush, e.l.f. Beauty) enabled the fund to outperform the index, despite a few disappointments.
The latest monthly portfolio review mainly increased the positions in the healthcare, IT and consumer discretionary sectors, and reduced mainly those real estate sector.
The portfolio is significantly overweight in consumer discretionary and industry, as well as in finance. The most underweight sectors are IT, media and healthcare.
Investment Monthly Report
April 2024
13 May 2024
Equity indices retreated in April (MSCI Europe NR -0.9%, MSCI USA NR -4.2%), temporarily interrupting the impressive bull run that began at the end of October, despite quarterly publications getting off to a great start. Investors preferred to focus on the resilience of inflation in the United States to challenge the consensus view that central banks will cut interest rates in the near future. This corrects the over-optimistic expectations of rate cuts at the start of the year, but does not call into question the fact that this accommodative process will soon get underway, particularly in the Eurozone.
In mid-April, macroeconomic uncertainty sowed doubts in investors’ minds about the ability to keep inflation under control. Then the markets rallied, particularly in small and mid caps, which are well represented in our all-cap strategies. Overall, the best-performing sectors were energy and the defensive sectors (healthcare, utilities and consumer staples). Against this backdrop, the Digital Stars funds ended the month outperforming their indices.
Digital Stars Europe Acc posted a monthly performance of -0.7% compared with -0.9% for the MSCI Europe NR. The disappointment in materials companies (Buzzi, CRH) was largely offset by the positive publications from our semiconductor stocks (Süss MicroTec, ASM International). But it was industrials that contributed most to the outperformance, particularly those linked to energy (Höegh Autoliners, MaireTecnimont).
The portfolio reviews carried out in April were diversified, increasing significantly our positions in the industry and materials sectors, as well as in the media. Among the exits were mainly consumer discretionary, bank and insurance stocks. The weight of the UK was increased, unlike Sweden.
Digital Stars Europe is overweight industry, finance and real estate. The fund is underweight healthcare, consumer staples and consumer discretionary.
Italy (largest overweight) remains the fund’s top weight at 17.5%, ahead of the UK at 15.4% and Sweden at 9.0%.
Digital Stars Continental Europe Acc ended April at -1.0% compared with -2.0% for the MSCI Europe ex UK NR. The fund benefited from the performance of the energy sector through its overweight position (Galp Energia) and via its exposure to stocks such as Höegh Autoliners and MaireTecnimont. The disappointment in building materials companies (Buzzi, CRH) was largely offset by the good news from our banks (BPER, Banco de Sabadell, CaixaBank) and semi-conductors (Süss MicroTec, ASM International).
The portfolio reviews carried out in April were diversified, increasing significantly our positions in industry, as well as in materials. Among the exits were mainly stocks in the finance sectors: banking and insurance.
Digital Stars Continental Europe is overweight in industry, as well as in real estate. The fund is underweight healthcare, consumer staples and consumer discretionary.
Italy (largest overweight) is still the fund’s top weight at 18.5%, ahead of Sweden at 12.5% and Germany at 11.4%.
Digital Stars Eurozone Acc posted a monthly performance of +0.3% compared with -1.9% for the MSCI EMU NR. The fund benefited from its all-cap approach, as well as from good earnings announcements (SÜSS MicroTec). In addition, the poor performance of some large caps (ASML, LVMH) enabled the fund to finish the month +2.5% ahead of its benchmark.
The rebalancing carried out in April saw the integration of consumer discretionary stocks. On the outgoing side, the telecom sector is the most represented.
The consumer discretionary sector becomes the largest overweight, ahead of media and real estate. The fund is underweight in utilities, food, healthcare, energy and materials.
France remains the largest country weight at 26.7%, followed by Italy at 21.1% and Germany at 14.7%. Italy remains the fund’s biggest relative bet, and Germany becomes the fund’s biggest underweight, ahead of France.
Digital Stars Europe Smaller Companies Acc ended up +0.7% in April, vs. -0.8% for the MSCI Europe Small Cap NR. A number of good earnings announcements for some of our holdings (Höegh Autoliners, CMC Markets, etc.) enabled the fund to outperform its benchmark index.
The monthly portfolio reviews have strengthened our positions in the industry and IT sectors. Sales occurred mainly in real estate and consumer staples.
The portfolio is now mainly overweight in industrials and materials, and underweight in finance, real estate and energy.
Sweden (one of the two most overweight countries, along with Italy) is now the biggest country weight in the portfolio and weighs 18.2%, ahead of the UK at 16.5% and Italy at 16.1%.
Digital Stars US Equities Acc USD was down -5.4% in April, vs. -4.2% for the MSCI USA NR and -6.6% for the MSCI USA Small Cap NR. Despite a good performance from a number of mid-caps (Badger Meter, Haemonetics Corporation, etc.), the fund’s ‘all caps’ profile was impacted by the underperformance of the small and mid-cap segment. It therefore ended the month between the two indices.
The latest monthly portfolio review mainly increased the positions in the industry and consumer discretionary sectors, and reduced mainly those in IT and healthcare sectors.
The portfolio is significantly overweight in industry, as well as in consumer discretionary and finance. The most underweight sectors are IT, media and healthcare.
Macro update – April 2024
9 April 2024
Investment Monthly Report
March 2024
6 April 2024
Equity indices continued to rise in March (MSCI Europe NR +3.9%, MSCI USA NR +3.1%). The impressive rally that began last October is the logical consequence of a context in which a virtuous double inflection of the growth and monetary cycles is taking shape. The obvious undervaluation of indices from a fundamental point of view has been corrected. European indices are now priced close to their historical average. This is less true in the United States, where the S&P 500 index is overvalued, due to the high representation of the expensive « Magnificent » stocks. However, the small- and mid-cap segment, whose relative behaviour is traditionally pro-cyclical, remains at a discount on both sides of the Atlantic (MSCI USA Small Cap PER 18.5x vs. 20-year average of 19.2x, MSCI Europe Small Cap PER 13.4x vs. average of 14.7x) and could emerge as a good performance driver in the coming months.
The positioning of our funds (positive bets on real estate and finance, negative bets on defensives) enabled them to take advantage of the strong market in March, despite some disappointments on certain technology stocks. Against this backdrop, the Digital Stars funds ended the month outperforming their indices.
Digital Stars Europe Acc posted a monthly performance of +4.2% compared with +3.9% for the MSCI Europe NR. The overweight in the real estate and finance sectors benefitted the fund (Fastighets AB Balder, BPER, Banco de Sabadell, BBVA), as did the underweight in the consumer staples segment. A few disappointments on technology stocks weighed negatively, accentuating the sector’s relative underperformance.
The portfolio reviews carried out in March were diversified, increasing significantly our positions in the industry sector. Among the exits were mainly real estate, energy, utilities and consumer discretionary stocks.
Digital Stars Europe is overweight industry, finance and real estate. The fund is underweight healthcare and consumer staples.
Italy (largest overweight) becomes the fund’s top weight at 17.4%, ahead of the UK at 14.5% and Sweden at 10.7%.
Digital Stars Continental Europe Acc ended March at +4.2% compared with +3.7% for the MSCI Europe ex UK NR. The overweight in the real estate and finance sectors benefitted the fund (Fastighets AB Balder, BPER, Banco de Sabadell, BBVA), as did the underweight in the consumer staples segment. In the construction materials sector, a number of stocks stood out (Buzzi, Heidelberg Materials), while some technology stocks disappointed and added to the sector’s underperformance.
The rebalancings carried out in March were diversified, increasing significantly our positions in industry, as well as in finance and pharmaceuticals. Among the exits were mainly energy, utilities and communication services stocks.
Digital Stars Continental Europe is overweight real estate, finance and industry. The fund is underweight healthcare and consumer staples.
Italy (largest overweight) is still the fund’s top weight at 17.8%, ahead of Sweden at 14.4% and Germany at 12.1%.
Digital Stars Eurozone Acc posted a monthly performance of +4.3% compared with +4.4% for the MSCI EMU NR. The fund benefited from the same trends in absolute terms, but had to deal with some poor earnings announcements. However, the weak performance of some large caps (ASML, LVMH) enabled the fund to finish the month in line with its benchmark.
The rebalancing carried out in March saw the integration of financial, paper and real estate stocks. On the outgoing side, the technology sector is the most represented.
The media sector remains the top relative bet of the fund, which is also overweight in the consumer discretionary and real estate sectors. The fund is underweight in utilities, food, healthcare, energy and materials.
France remains the largest country weight at 24.7%, followed by Italy at 21.1% and Germany at 16.7%. Italy remains the fund’s biggest relative bet, and France the fund’s biggest underweight.
Digital Stars Europe Smaller Companies Acc ended up +3.6% in March, vs. +4.3% for the MSCI Europe Small Cap NR. A number of good results announcements for some of our stocks (CMC Markets, Maire Tecnimont) partly offset more disappointing reports earlier in the month (Clas Ohlson, Mota Group).
The monthly portfolio reviews have strengthened our positions in the industry and healthcare sectors. Sales occurred mainly in energy, telecommunications, consumer discretionary and IT.
The portfolio is now mainly overweight in industrials, materials and consumer staples, and underweight in finance and energy.
Sweden (one of the two most overweight countries, along with Italy) is now the biggest country weight in the portfolio and weighs 21.1%, ahead of Italy at 17.0% and the United Kingdom (the most largely underweight country) at 16.8%.
Digital Stars US Equities Acc USD was up +3.5% in March, vs. +3.1% for the MSCI USA NR and +3.8% for the MSCI USA Small Cap NR. The US market performed fairly homogeneously this month. It was the behaviour of individual stocks that made the difference, thanks to positive announcements from some of our portfolio holdings, like GAP, Honest Company.
The latest monthly portfolio review mainly increased the positions in the media and real estate sectors, and reduced mainly those in industry, materials and consumer discretionary sectors.
The portfolio is significantly overweight in industry, as well as in consumer discretionary and finance. The most underweight sectors are IT, media and healthcare.
Investment Monthly Report
February 2024
11 March 2024
The market made further progress in February (MSCI Europe NR +1.9%, MSCI USA NR +5.3%). The resilience of global economic momentum is leading to upward revisions of GDP growth expectations, and this is proving to be a powerful support for cyclical assets, including equities. This is all the more buoyant given that it has taken many investors by surprise. At the same time, earnings releases also came as a positive surprise, with margins well above expectations. For the 4th quarter, earnings for S&P 500 companies were +7.2% above expectations, and +3.8% for STOXX Europe 600 stocks. All we can do now is hope that the resilience of the economy does not call into question the accommodative pivot of the central banks, which is still expected in 2024, albeit in a more nuanced way than at the start of the year.
The relative pressure on interest rates logically benefited our financial stocks (BPER, Wise, Unipol Gruppo) during the month, and penalised the real estate sector, well represented in the portfolios. Semiconductor and luxury goods stocks were also among the best contributors. Earnings announcements usually support our Momentum approach, and this month’s good publications from our holdings (Höegh Autoliners, Sulzer, Royal Vopak, GTT) made a positive contribution to our funds as a whole. Against this backdrop, the Digital Stars funds ended the month outperforming their indices. Digital Stars Europe Acc posted a monthly performance of +2.7% compared with +1.9% for the MSCI Europe NR. Digital Stars Continental Europe Acc ended February at +3.1% compared with +2.4% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc posted a monthly performance of +1.9% compared with +3.3% for the MSCI EMU NR. The fund benefited from the same trends in absolute terms, but was adversely affected in relative terms by the high concentration of the index on the month’s key drivers.
The portfolio reviews carried out in February were diversified, increasing our positions in the industry, healthcare and finance sectors. Among the exits were mainly consumer staples, materials and IT stocks.
Digital Stars Europe is overweight finance, industry and real estate. The fund is underweight healthcare and consumer staples.
The UK is still the fund’s top weight at 16.9%, ahead of Italy at 16.2% (largest overweight) and Germany at 9.8%.
Digital Stars Europe Smaller Companies Acc ended up +1.4% in February, vs. 0.0% for the MSCI Europe Small Cap NR. Earnings announcements have supported the fund over the month (BAM Groep, SAF-Holland, Fugro). The good performance of growth stocks, well represented in the portfolio, outweighed the poor performance of the real estate sector.
The monthly portfolio reviews have strengthened our positions in the healthcare and IT sectors. Sales occurred mainly in industry, consumer staples and energy.
The portfolio is now mainly overweight in materials and consumer staples, and underweight in finance and healthcare.
Sweden, largest country overweight, is now the biggest country weight in the portfolio and weighs 20.6%, ahead of the United Kingdom (the most largely underweight country) at 15.1% and Italy (2nd largest country overweight) at 13.3%.
Digital Stars US Equities Acc USD was up +6.2% in February, vs. +5.3% for the MSCI USA NR and -5.3% for the MSCI USA Small Cap NR. The US market performed fairly homogeneously this month. It was the behaviour of individual stocks that made the difference, thanks to positive announcements from some of our portfolio holdings, like e.l.f. Beauty or AppLovin.
The latest monthly portfolio review mainly increased the positions in consumer discretionary, consumer staples, as well as in finance, and reduced mainly those in IT and real estate sectors.
The portfolio is significantly overweight in industry, as well as in consumer discretionary and finance. The most underweight sectors are IT, media and pharmaceuticals.
Investment Monthly Report
January 2024
7 February 2024
The macro environment continues to be favourable for equities (MSCI Europe NR +1.6%, MSCI USA NR +1.5% in January). Economic momentum is still picking up in all regions. Moreover, the central banks are still expected to complete their monetary pivot in the first half of 2024, despite Mr Powell’s less generous comments at the end of the month. In this context, interest rates rose in January, which did not help the small and mid cap segment in relative terms. Surprisingly, given the rising interest rates and climbing indices, it was the defensive Visibility stocks that stood out, while Value stocks underperformed. The start of the announcement period largely explains this phenomenon. In Europe, for example, ASML Holding and LVMH, two of the biggest names listed on the stock market, climbed by +17.1% and +5.5% respectively in January on the back of well-received quarterly results. Could this finally be the sign of a return to fundamentals, more favourable to stock-pickers? It is likely and bodes well for our active management approach.
Small and mid caps suffered from the relative pressure on interest rates during the month. However, this movement benefited all of our Value segment, in particular financial stocks, which are overweighted in our funds, via Italy in particular. In addition, our selection in the materials sector made a significant contribution to January’s performance, thanks in particular to cement companies (CRH PLC, Buzzi Spa). Against this backdrop, the Digital Stars funds ended the month slightly ahead of their indices. Digital Stars Europe Acc posted a monthly performance of +2.1% compared with +1.6% for the MSCI Europe NR. Digital Stars Continental Europe Acc ended January at +1.8% compared with +1.9% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc posted a monthly performance of +3.7% compared with +2.2% for the MSCI EMU NR.
The portfolio reviews carried out in January were diversified, increasing our positions in the healthcare, industry and IT sectors. Among the exits were mainly consumer discretionary, bank and energy stocks. The overweight of banking stocks in Digital Stars Europe is now at 3.3%.
Digital Stars Europe is overweight financials, real estate and industrials. The fund is underweight healthcare and consumer staples.
The UK is still the fund’s top weight at 19.8%, ahead of Italy at 14.3% (largest overweight) and Germany at 11.0%.
Digital Stars Europe Smaller Companies Acc ended up +0.8% in January, vs. -0.9% for the MSCI Europe Small Cap NR. Small and mid-caps suffered from the relative pressure on interest rates, but this movement benefited our entire Value segment, particularly our Italian banks. Our materials stocks made a significant contribution to January’s performance, as did our industrials.
The monthly portfolio reviews have strengthened our positions in the communication services, real estate and healthcare sectors. Sales occurred mainly in consumer discretionary, energy and finance.
The portfolio is now mainly overweight in consumer staples, materials and communication services, and underweight in finance, healthcare and IT.
The United Kingdom is the biggest country weight in the portfolio and weighs 17.3% (but remains the most largely underweight country), ahead of Sweden at 15.3% and Italy at 12.5% (2nd largest country overweight).
Digital Stars US Equities Acc USD was up +0.2% in January, vs. +1.5% for the MSCI USA NR and -3.5% for the MSCI USA Small Cap NR. Small and mid caps suffered from the relative tension on interest rates during the month, as well as from Mr Powell’s ‘hawkish’ speech on 31 January. Our underweight position in the communications services and information technology sectors did not pay off, nor did our selection within financial stocks. Some individual stocks in the IT and consumer sectors made a positive contribution to performance.
The latest monthly portfolio review mainly increased the positions in consumer discretionary, as well as in finance, real estate and media, and reduced mainly those in IT and industry sectors.
The portfolio is significantly overweight in industry, as well as in consumer discretionary and finance. The most underweight sectors are IT, media and pharmaceuticals.
Investment Monthly Report
December 2023
1 January 2024
Equity indices closed December on a high note (MSCI Europe NR +3.7%, MSCI USA NR +4.7%), with 2023 remaining an excellent year for investors (MSCI Europe NR +15.8%, MSCI USA NR +26.1%). The monetary catalyst unveiled in November has played out over an extended period. Investors are still betting on a reversal in monetary policy in the near future. Rate cuts are expected as early as the first half of 2024. In this context, the yield curve as a whole eased in December, boosting equity indices, particularly small- and mid-cap ones (MSCI Europe Small NR +7.0%, MSCI USA Small +11.3%).
The easing in bond yields has benefited the profile of our funds, which are overweight in the cyclical real estate and industrial sectors, and underweight in the more defensive healthcare and consumer staples sectors. However, this has not compensated for the impact of the bond yields on some of our banks, especially in southern Europe (BPER, Banco BPM, Banco de Sabadell). Against this backdrop, the Digital Stars funds ended the month underperforming their indices. Digital Stars Europe Acc posted a monthly performance of +3.3% compared with +3.7% for the MSCI Europe NR. Digital Stars Continental Europe Acc ended December at +2.7% compared with +3.8% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc posted a monthly performance of +3.5% compared with +3.2% for the MSCI EMU NR.
The portfolio reviews carried out in December were diversified, increasing our positions in the real estate and industry sectors. Among the exits were mainly financials and consumer discretionary stocks. The overweight of banking stocks in Digital Stars Europe is now at 4.5%.
Digital Stars Europe is overweight financials, real estate and industrials. The fund is underweight healthcare and consumer staples.
The UK is still the fund’s top weight at 21.9%, ahead of Italy at 13.7% (largest overweight) and Germany at 12.0%.
Digital Stars Europe Smaller Companies Acc ended up +3.9% in December, vs. +7.0% for the MSCI Europe Small Cap NR. The fund benefited from the rally of the small caps, but was held back in particular by banks, which were affected by the easing of the yield curve, and by industrials.
The monthly portfolio reviews have strengthened our positions in the materials, IT, real estate and food sectors. Sales were mainly in consumer discretionary, industrials and financials.
The portfolio is now mainly overweight in consumer staples, energy and materials, and underweight in finance, healthcare and IT.
The United Kingdom is the biggest country weight in the portfolio and weighs 19.0% (but remains the most largely underweight country), ahead of Sweden at 13.3%, which stands now ahead of Italy at 13.1% (now the largest country overweight).
Digital Stars US Equities Acc USD was up +7.9% in December, outperforming the MSCI USA NR at +4.7% and the MSCI USA Small Cap NR at +11.3%. The outperformance is mainly due to the fund’s exposure to small and mid caps and to value/cyclical stocks, in particular regional banks, personal care products and industrial companies.
The latest monthly portfolio review mainly increased the positions in financials, as well as in real estate and consumer discretionary, and reduced mainly those in IT and industry sectors.
The portfolio is significantly overweight in industry, as well as in banks. The most underweight sectors are IT, media, and pharmaceuticals.
Investment Monthly Report
November 2023
8 December 2023
Equity indices rose strongly in November (MSCI Europe NR +6.4%, MSCI USA NR +9.4%). The good inflation figures were reassuring, as was the fact that, from a fundamental point of view, corporate margins remained at a high level after the release of the 3rd quarter results.
We may be at the crossroads of two virtuous inflections. That of the monetary cycle, with the first rate cuts expected in the 1st half of 2024, combined with that of the growth cycle, with both sides of the Atlantic at the bottom of the cycle and a gradual improvement in activity expected. In addition, indices are attractively valued in both Europe and the United States, if we exclude the « magnificent 7 ».
The positive news on inflation was well received by investors: the markets rallied strongly, particularly small and mid caps, which are well represented in the funds. Semiconductors (ASM Int’l, BESI, Aixtron) have benefitted from the easing in long-term bond yields. Our underweight position in defensive stocks (healthcare and consumer staples) boosted our funds in relative terms, as did our position in financials (BPER), particularly UK stocks (3i Group, Wise) whose good publications were welcomed by the market. Against this backdrop, the Digital Stars funds ended the month outperforming their indices. Digital Stars Europe Acc posted a monthly performance of +7.6% compared with +6.4% for the MSCI Europe NR. Digital Stars Continental Europe Acc ended November at +7.8% compared with +7.4% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc posted a monthly performance of +9.1% compared with +7.9% for the MSCI EMU NR.
The portfolio reviews carried out in November were diversified, increasing our positions in the real estate and financial sectors. Among the exits were IT, industry and healthcare stocks. The overweight of banking stocks in Digital Stars Europe is now at 5.8%.
Digital Stars Europe is overweight financials, real estate and industrials. The fund is underweight healthcare and consumer staples.
The UK is still the fund’s top weight at 19.5%, ahead of Italy at 14.6% (largest overweight) and Germany at 12.3%.
Digital Stars Europe Smaller Companies Acc ended up +6.9% in November, vs. +9.0% for the MSCI Europe Small Cap NR. IT stocks (X-Fab, Hanza) contributed the most, while the negative returns of stocks linked to energy (Okeanis Eco Tankers, Odfjell Drilling, Höegh Autoliners) restrained the rally of small-caps.
The monthly portfolio reviews have strengthened our positions in the real estate and media sectors. Sales were mainly in healthcare and consumer staples.
The portfolio is mainly overweight in consumer discretionary, consumer staples and energy, and underweight in healthcare, IT and financials.
The United Kingdom is the biggest country weight in the portfolio and weighs 23.3% (but remains the most largely underweight country), ahead of Italy at 12.1%. Greece is still the most overweight country at 8.4%.
Digital Stars US Equities Acc USD was up +10.7% in November, outperforming the MSCI USA NR at +9.4% and the MSCI USA Small Cap NR at +9.0%. The fund’s outperformance comes from the exposure to small and mid caps. Some construction-related industrial stocks performed well (Simpson Manufacturing, Builders FirstSource, Boise Cascade), as did a number of technology stocks (Workday, SolarWinds, Palo Alto Networks).
The latest monthly portfolio review mainly increased the positions in financials and utilities, and reduced those in IT and industry sectors.
The portfolio is significantly overweight in industry. The most underweight sectors are IT, media, and pharmaceuticals.
Chahine Capital continues to expand internationally
20 November 2023
After announcing the strengthening of its research teams last month, Chahine Capital is pursuing its growth strategy in Europe with the appointment of Gerardo Coppola and Andreas Schneeberger as Sales Managers for Italy and Germany & Austria respectively.
Drawing on its proprietary quantitative investment models which are remarkable with over 25 years of track record, the company now markets its range of funds out of 4 European countries: Luxembourg, France, Germany and Italy.
« Andreas and Gerardo have been appointed to strategic countries for the development of Chahine Capital’s funds, in order to be ever closer to our clients; our company will be able to benefit from their solid commercial expertise and the networks they have built up during their respective careers. Our teams are delighted to welcome them; Chahine Capital is showing ambition in Equity markets that offer good prospects for quantitative investment; it’s important to be prepared!” – emphasizes Charles Lacroix, Chief Executive Officer at Chahine Capital.
Andreas Schneeberger is appointed Sales Manager Germany & Austria
Andreas Schneeberger is in charge of promoting Chahine Capital’s range of funds in Germany and Austria, areas in which he has built up trusting relationships with numerous investors over the past 20 years. Based in Frankfurt, Andreas was until last October Head of Development Germany / Austria at Generali Investments.
Andreas Schneeberger was fund of funds manager at DekaBank (Frankfurt) from 1994 to 2002. He then held sales positions at INVESCO Service GmbH and Societe Generale Asset Management (Frankfurt, 2005-2010), before working as an investment consultant for Bank Gutmann AG (Vienna, 2010-2013). Returning to Frankfurt in 2014, Andreas became senior sales representative for Germany/Austria at Aquilla Capital Asset Management, before being appointed Head of Development Germany/Austria (2015-2020) at Danske Bank Asset Management and FEfundinfo AG, before joining Generali Investments in 2021.
Andreas Schneeberger is a certified member of the DVFA program (CSIP – Certified Senior Investment Professional Frankfurt, 2018) and holds a degree in Economics from Klinger Academy (1985).
Gerardo Coppola is appointed Senior Sales Manager Italy
Gerardo is in charge of promoting Chahine Capital’s range of funds in Italy. Based in Milan, he was previously Head of Distribution at BNP Paribas REIM SGR.
Gerardo Coppola began his career in 2000 in Luxembourg, first with Lombard International Assurance and then with State Street Bank Luxembourg. In 2002, he became Country Manager – Italy at VITIS Life (Luxembourg) and, after 4 years, joint Cardif Lux Vie (2006-2014) as International director. In 2015, Gerardo left Luxembourg to Italy, where he became Senior Sales Manager at Edmond de Rothschild (Milan), before joining BNP Paribas REIM SGR (Milan) in 2021.
Gerardo Coppola graduated from Università degli Studi di Trieste in Economics and Business Administration (1992) and from Istituto Tecnico Commerciale Maffucci – Calitri (AV) in Accounting.
Investment Monthly Report
October 2023
5 November 2023
Equity indices fell in October (MSCI Europe NR -3.6%, MSCI USA NR -2.3%). This was the 3rd consecutive month of decline. The tragic events in the Middle East have led to a sharp rise in the geopolitical risk premium, which is weighing heavily on indices. As is often the case in such situations, fundamentals have been sidelined, but this may only be temporary. The initial lessons drawn from the quarterly publications are indeed encouraging. Despite mixed sales releases, signalling that consumer spending is being held back by inflation, earnings are surprisingly positive. Corporate margins are therefore stronger than expected, and index valuations are very low, especially in Europe. In addition, the sharp fall in inflation points to an accommodative inflection by central banks, probably as early as the 1st half of 2024, which could fuel an equity rally in the coming months.
Geopolitical tensions in the Middle East have fuelled risk aversion, affecting stock markets, particularly the small and mid caps to which we are exposed. But these tensions did also benefit energy-related stocks (BW LPG, TORM, Hoegh Autoliners). Our banks (Banco BPM, BPER, BCP), which represent our main sector bet, stood out positively from the rest of the sector, particularly in southern Europe. Against this backdrop, the Digital Stars funds ended the month down compared with their indices. Digital Stars Europe Acc posted a monthly performance of -4.4% compared with -3.6% for the MSCI Europe NR. Digital Stars Continental Europe Acc ended October at -4.1% compared with -3.4% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc posted a monthly performance of -6.9% compared with -3.3% for the MSCI EMU NR.
The rebalancings carried out in October were diversified, increasing our positions in the financial services, communication services, and real estate. Among the exits were materials (packaging), industry and consumer discretionary stocks. The overweight of banking stocks in Digital Stars Europe is now at 5.4%.
Digital Stars Europe is overweight financials and industrials. The fund is underweight healthcare and consumer staples. The UK is still the fund’s top weight at 18.9%, ahead of Italy at 14.9% (largest overweight) and Germany at 12.7%.
Digital Stars Europe Smaller Companies Acc ended down -4.9% in October, like all the small caps segment. But the fund outperformed the MSCI Europe Small Cap NR at -5.9%, thanks to our stocks linked to energy (Advance Gas Holding, BW LPG, Okeanis Eco Tankers), our banks (BPER, Banco BPM), and some real estate stocks (Aroundtown).
The monthly portfolio reviews have strengthened our positions in the energy sector, as well as in the industry and telecommunications. Sales were mainly in consumer discretionary and IT, as well as in health care.
The portfolio is still mainly overweight in consumer discretionary, energy and consumer staples, and underweight in IT, real estate and healthcare.
The United Kingdom is the biggest country weight in the portfolio and weighs 22.7% (but remains the most largely underweight country), ahead of Italy at 11.4%. Greece is still the most overweight country at 8.2%.
Digital Stars US Equities Acc USD was down -5.2% in October, underperforming the MSCI USA NR at -2.3% but ahead of the MSCI USA Small Cap NR at -6.3%. Exposure to small and mid-cap stocks explains the performance differential, as well as the correction of some companies that revised their guidance downwards.
The latest monthly portfolio review mainly increased the positions in industrials and financials, and reduced those in consumer discretionary sector.
The portfolio is significantly overweight in industry. The most underweight sectors are media, pharmaceuticals and IT (semiconductors).
Chahine Capital appoints new Chief Investment Officer
24 October 2023
Chahine Capital, a pioneer in quantitative Momentum equity investment, announces the appointment of Aymar de Léotoing as Chief Investment Officer (CIO). Aymar succeeds Julien Bernier, who has been with Chahine Capital since 2001 and with whom he has worked for the past 7 years. Chahine Capital’s quantitative research team has also been strengthened by the appointments of Julien Messias and Franck Salzard as Senior Quantitative Researcher and Quantitative Analyst respectively.
Aymar de Léotoing, Chief Investment Officer – Portfolio Manager
Aymar de Léotoing, Portfolio Manager at Chahine Capital since 2016, becomes CIO & Portfolio Manager.
Aymar began his career in 2000 as a consultant with JCF Group, before joining FactSet.
In 2007, he took up the position of Quantitative Analyst at Société Générale AM / Amundi, before joining Arkeon Finance and then Chahine Capital in 2016 as Portfolio Manager.
Aymar de Léotoing holds an engineering degree from ESTP Paris (1999). He holds a Certificate in Quantitative Finance (CQF, Fitch Learning/Wilmott) and has taught financial analysis at Neoma Business School Paris.
Julien Messias, Senior Quantitative Researcher
Julien Messias joins Chahine Capital as Senior Quantitative Researcher. He was previously Head of R&D and US Equities Quantitative Portfolio Manager at Quantology Capital Management, a quantitative investment manager he co-founded in 2013.
After experiences at BNP Paribas Arbitrage and Banque Fédérative du Crédit Mutuel, Julien Messias took up the position of Equity Derivatives Trader at ING in Belgium in 2008. In 2012, he became Life Reinsurance Pricing Actuary at PartnerRe, before setting up Quantology Capital Management the following year. Julien will join the Chahine Capital team on Dec 1st and will be based in Paris.
Julien Messias holds a Master2 Actuarial degree from CNAM (2017), a Master’s degree from ESSEC Business School Paris (2008) and a Master2 Research 104 from Université Paris IX Dauphine / ENSAE (2008). Julien is a certified actuary of the Institut des Actuaires; he has taught a Master1 (Applied Economics) at Université Paris IX Dauphine Paris and a Master (Quantitative Finance / Financial Markets) at Solvay Brussels School of Economics and Management.
Franck Salzard, Quantitative Analyst
Franck Salzard has joined Chahine Capital’s research team as Quantitative Analyst and is based in Luxembourg. He holds an engineering degree in microelectronics and computer science from the Ecole des Mines de Saint Etienne (2023) and a Master’s degree in quantitative finance from IAE Grenoble.
Franck previously worked as an intern in the fund selection team at Banque de Luxembourg Investments (2023) and in securities data management at Banque de Luxembourg (2022).
« We are delighted to announce the appointment of Aymar de Léotoing as Chief Investment Officer at Chahine Capital. Aymar knows the company very well and has all the expertise and experience required to lead the Investment and Research teams, which are at the heart of a quantitative approach such as that implemented by Chahine Capital for over 25 years. This team has also been strengthened by the arrivals of Julien Messias, a very senior and seasoned professional, and Franck Salzard, an expert in data science », emphasizes Charles Lacroix, Chief Executive Officer at Chahine Capital.
Macro update – October 2023
17 October 2023
Investment Monthly Report
September 2023
11 October 2023
Equity indices retreated in September (MSCI Europe NR -1.6%, MSCI USA NR -4.7%), due to pressure on interest rates. The US 10-year sovereign yield reached 4.57% (vs. 4.10% at the end of August) and the German 3.84% (vs. 3.47%). Such levels had not been reached since 2007 in the US and 2011 in Germany, respectively. The cause of this brutal tension was the Fed, who took a surprisingly restrictive stance at its September meeting, and significantly toned down its rate cut projections for 2024. This dampened investors’ enthusiasm. However, the significance of this event should not be overestimated. Communication is an integral part of monetary policy, and the priority remains the fight against inflation, despite a trajectory that has been moving in the right direction since the summer 2022. It would not be surprising to see a shift in policy soon by central banks, which have no incentive to trigger a severe recession. In an environment dominated by negative news (rising oil prices, the beginnings of a US recession, a sluggish Chinese economy and restrictive rhetoric from central bankers), the slightest piece of good news could support the equity asset class, whose valuation remains attractive (particularly in Europe), and in our view already anticipates a moderate recession. In this respect, the quarterly publications due to start soon will be particularly closely watched.
The sharp rise in bond yields benefited banks (BPER, Jyske Bank), our main sector bet. The surge in oil prices was reflected in our energy-related stocks (TORM, Shoeller-Bleckmann, Technip Energies). But the rising yields have affected the equity markets in general, and small caps and growth stocks in particular, which are well represented in our portfolios. Against this backdrop, the Digital Stars funds ended the month down compared with their indices. Digital Stars Europe Acc posted a monthly performance of -2.8% compared with -1.6% for the MSCI Europe NR. Digital Stars Continental Europe Acc ended September at -2.9% compared with -2.5% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc posted a monthly performance of -4.0% compared with -3.2% for the MSCI EMU NR.
The rebalancings carried out in September were diversified, increasing our positions in the energy, construction materials and telecommunications sectors. Among the exits were IT and consumer discretionary stocks. The overweight of banking stocks in Digital Stars Europe is now at 5.0%.
Digital Stars Europe is also overweight financials and industrials. The fund is underweight healthcare and consumer staples. The UK is still the fund’s top weight at 19.4%, ahead of Italy at 15.1% (largest overweight) and Germany at 12.5%.
Digital Stars Europe Smaller Companies Acc ended down -3.3% in September, slightly behind the MSCI Europe Small Cap NR at -3.1%. Consumer discretionary was a drag on the fund (Jumbo, Dunelm), particularly the automotive sector (Piaggio, Aston Martin Lagonda). But the energy sector held up well (Okeanis Eco Tankers, Technip Energies).
The monthly portfolio reviews have strengthened our positions in the real estate sector, as well as in the energy and telecommunications. Sales were mainly in IT and consume staples, as well as in health care.
The portfolio is still mainly overweight in consumer discretionary, as well as in consumer staples, and significantly underweight in real estate.
The United Kingdom is the biggest country weight in the portfolio and weighs 23.2% (but remains the most largely underweight country), ahead of Italy at 12.3%. Greece is still the most overweight country at 8.5%.
Digital Stars US Equities Acc USD was down -6.0% in September, underperforming the MSCI USA NR at -4.7% and the MSCI USA Small Cap NR at -5.8%. The market drop particularly affected growth and cyclical stocks in the technology (semiconductors), consumer discretionary and industrial sectors.
The latest monthly portfolio review mainly increased the positions in the industry, and reduced those in the financial sector.
The portfolio is overweight in industry and consumer discretionary. Media is still the biggest underweight, before finance and pharmaceuticals.
Investment Monthly Report
August 2023
6 September 2023
While the resilience of the global economy had buoyed equity indices in July, they declined in August as long-term yields remained high. Furthermore, the latest macro-economic releases from China were disappointing. Against this backdrop, cyclical stocks and growth stocks sensitive to the Chinese economy underperformed. The technology, mining, travel, industrial and automobile sectors thus gave up more than 5% in August in Europe. However, the Chinese authorities reacted strongly at the end of the month with the introduction of credit support measures, and everything now points to a continuation of the rebound in global economic momentum initiated in September 2022. Should this be the case, the equity asset class could continue to benefit from reasonable valuations (12-month P/E of 13.0x in Europe and 15.0x in the US for the S&P 500 Equal Weight). Especially as inflation continues to fall, pointing to an accommodative reversal by central banks as early as the 1st half of 2024.
The market decline in August was ultimately significant enough to erase all of July’s gains. Bond yields remained stable in Europe, and the disappointing news on the Chinese economy cast a chill over cyclical stocks as a whole, particularly certain growth technology and industrial stocks that are well represented in the Digital Fund portfolios. Energy has been the only real winner on the markets, supported by oil prices. The more defensive health and real estate sectors are standing out relative to the market. Thus, after three consecutive months of relative outperformance and, despite favourable publications over the summer, the more defensive context of August and lower market volumes left the Digital Stars funds slightly behind their indices over the month. Digital Stars Europe Acc posted a monthly performance of -3.0% compared with -2.4% for the MSCI Europe NR. Digital Stars Continental Europe Acc ended August at -2.9% compared with -2.4% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc, with a more defensive profile, posted a monthly performance of -1.9% compared with -3.1% for the MSCI EMU NR.
The rebalancings carried out in August were diversified, selecting stocks in the industrial (construction, electrical equipment), utility, banking or food sectors. Among the exits were IT and healthcare stocks. We continue to observe a comeback of British stocks. The overweight of banking stocks in Digital Stars Europe is stable at 6.1%. Digital Stars Europe is also overweight financials, industrials and technology. The fund is underweight healthcare and consumer staples. The UK is now the fund’s top weight at 18.4%, ahead of Italy at 16.2% (still the largest overweight) and Germany at 12.6%.
Digital Stars Europe Smaller Companies Acc ended down -3.9% in August, vs. -2.9% for the MSCI Europe Small Cap NR. Positive publications boosted the retail sector in the fund, but this did not offset the decline in growth stocks, particularly in the IT sector. The monthly portfolio reviews focused on strengthening food and material sectors. Sales were mainly in IT, as well as in industry and finance. The portfolio is still mainly overweight in consumer discretionary, as well as in food, and significantly underweight in real estate. The United Kingdom is reinforced furthermore and weighs now 24.9% (but remains the most largely underweight country), ahead of Italy at 12.9%. Greece is still the most overweight country at 8.9%.
Digital Stars US Equities Acc USD was down -1.7% in August, in line with the MSCI USA NR and outperforming the MSCI USA Small Cap NR at -4.1%. Good contributions from the consumer staples sector and the energy sector, offset the weaker return of our positions in financials and consumer discretionary. The latest monthly portfolio review saw the addition of stocks from the consumer discretionary and media sectors. Sales were mainly in industry and real estate. Of note are significant offsetting purchases and sales in IT and healthcare. The portfolio remains overweight in industry and consumer discretionary. Media is still the biggest underweight, before pharma.
Investment Monthly Report
July 2023
3 August 2023
Equity markets continued to rise in July (MSCI Europe NR +2%; MSCI USA NR +3.4%). A combination of several favourable factors justified the impressive equity rally initiated in September 2022. Economic momentum continued to pick up, as was reflected in significant upward revisions of economic growth forecasts; inflation and inflation expectations have fallen significantly, pointing to the potential for an accommodating monetary stance from central banks in the near future; corporate earnings are reassuring, highlighting attractive valuations for many segments of the stock market; and the level of equity investment by large institutional investors remains low, fuelling buying flows.
The US economy remains robust, with GDP growth revised upwards in July, removing the short-term risk of recession. As a result, cyclical sectors, well represented in the portfolio, outperformed. Banks, energy and basic materials were the month’s winners. Technology lagged, as did the luxury goods sector, impacted by disappointing results from LVMH and Richemont. In this bullish environment, Digital Stars funds are positive and in line with their indices. Performance was influenced by the announcement of half-yearly results, which were generally good. By the end of July, 52% of Digital Stars Europe stocks had published, and 70% of these companies had seen their 2023 earnings estimates revised upwards. These earnings announcements will continue over the next few weeks, which should keep investors focused on company fundamentals, and could once again be favourable to our strategy. Digital Stars Europe Acc posted a monthly performance of +2% compared with +2% for the MSCI Europe NR. Digital Stars Continental Europe Acc ended July at +2% compared with +1.9% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc, with a more defensive profile, posted a monthly performance of +1.9% compared with +0.9% for the MSCI EMU NR.
The rebalancing carried out in July was diversified, selecting stocks in the industrial, automotive, IT and healthcare sectors, as well as a few financials. Among the exits were basic materials stocks (mainly steel) and luxury goods. We continue to observe a comeback of British stocks. The overweight of banking stocks in Digital Stars Europe is stable at 6.1%. Digital Stars Europe is overweight financials, technology and industrials. The fund is underweight healthcare, food and utilities. Italy remains the fund’s top weight and largest overweight, at 16.4%. The UK moves into second place at 15.7%, ahead of Germany (12.7%).
Digital Stars Europe Smaller Companies Acc ended up +2.1% in July, vs. +3.4% for the MSCI Europe Small Cap NR. Greek stocks continued to perform well. But our semiconductor stocks and consumer discretionary stocks penalised the fund in relative terms. The monthly portfolio reviews focused on strengthening industry and IT sectors, as well as utilities. Sales were mainly in materials (chemicals and glass containers), as well as in finance, energy and consumer discretionary. The portfolio is still mainly overweight in consumer discretionary, and significantly underweight in real estate and materials. The United Kingdom is reinforced furthermore and weighs now 22.0% (but remains the most largely underweight country), ahead of Italy at 13.3%. Greece is still the most overweight country at 8.8%.
Digital Stars US Equities Acc USD was up +2.7% in July, vs. +3.4% for the MSCI USA NR and +5.2% for the MSCI USA Small Cap NR. The good publications of certain stocks were not enough to offset the less well-received publications in the industry. The fund’s under-exposure in the media also contributed negatively. The latest monthly portfolio review saw the addition of stocks from the finance, consumer discretionary and healthcare sectors. Sales were mainly in media, industry and technology. The portfolio remains overweight in industry, as well as in consumer discretionary. Media is now back to being the biggest underweight, before pharma.
Investment Monthly Report
June 2023
10 July 2023
The global economy is surprisingly resilient, and this is reflected in the powerful appreciation of equity indices in June (MSCI Europe NR +2.4%, MSCI USA NR +6.6%). Whereas at the start of the year, the consensus of economists was predicting global GDP growth of +2.0% in 2023, the forecast is now +2.6%. This has led central banks to resume the restrictive rhetoric they abandoned at the time of the banking setbacks. They judge that the battle against inflation has not yet been won, despite the significant fall in inflation in recent months. Against this backdrop, the « Value » style logically stood out in June. Pro-cyclical in relative terms, it is benefiting from the rise in rates across all maturities on the yield curve to resume a trend that began in November 2020, when vaccines were discovered.
The markets therefore ended June on a high note. They seem to have finally assimilated the good corporate results and have resisted the central banks’ less accommodating stance. Fears of a pronounced economic slowdown have eased, favouring cyclical sectors, which are well represented in our portfolios. Banks, specialty retailing and tourism were the winners of the month, while technology took a breather after the rally at the end of May. In this favourable environment, the Digital Stars funds are positive and outperforming their indices. They are benefiting from an overweight in the financial sector and, more generally, from a positioning suited to rising interest rates, being underweight in the proxy bond sectors (healthcare, commodities, telecoms, property). Digital Stars Europe Acc posted a monthly performance of +3.2% compared with +2.4% for the MSCI Europe NR. Digital Stars Continental Europe Acc ended June at +3.8% compared with +2.7% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc, with a more defensive profile, posted a monthly performance of +2.3% compared with +3.8% for the MSCI EMU NR.
The rebalancing carried out in June was diversified, selecting stocks in the distribution, tourism, steel and banking sectors. Exits included energy, mining and healthcare stocks. British stocks are also making a comeback. The overweight in banking stocks has been increased to 6.7% in Digital Stars Europe. The weighting of the energy sector has returned to the level of its index. Digital Stars Europe is overweight financials, technology and industrials. The fund is underweight healthcare, consumer staples and utilities. Italy remains the fund’s largest holding and its largest overweight, at 15%, ahead of Germany (13.5%) and the United Kingdom (12.9%).
Digital Stars Europe Smaller Companies Acc ended up +3.4% in June, beating the MSCI Europe Small Cap NR at +0.8%. Semiconductors performed very well, as did Greek stocks. Lookers share jumped +34% on the announcement of Alpha Auto Group’s takeover bid. The monthly portfolio reviews focused on strengthening healthcare equipment, IT sectors, consumer discretionary and consumer staples. Sales were mainly in energy, materials (steel and glass) and media. The portfolio is still mainly overweight in consumer discretionary, and significantly underweight in real estate and media. The weight of energy is now in line with the market. The United Kingdom is reinforced and weighs now 18.7% (but remains the most largely underweight country), ahead of Italy which is decreased to 14.5%. Greece is the most overweight country at 8.8%.
Digital Stars US Equities Acc USD was up +8.3% in June, vs. +6.6% for the MSCI USA NR and +8.6% for the MSCI USA Small Cap NR. The month’s outperformance came mainly from industrials, which are well exposed in the fund, and technology. The latest monthly portfolio review saw the addition of stocks from the consumer discretionary, IT, real estate, as well as industry sectors. Sales were mainly in finance.
The portfolio remains overweight in industry. Finance is now the biggest underweight, before media and pharma.
Investment Monthly Report
May 2023
6 June 2023
May was a month of contrasts for equity indices. They rose in the United States (S&P 500 NR +0.6%) and fell in Europe (MSCI Europe NR -2.5%). Since the end of January, the trend has clearly been that of horizontal consolidation with relatively minor amplitude. Macro conditions weighed at the start of the month, with disappointing inflation figures and below-expectation economic surveys. Conversely, microeconomic fundamentals continue to deliver upside surprises as the quarterly publication period draws to a close. In this context, the earnings momentum is resuming an upward trend that had been temporarily overshadowed by the banking debacles of March and April.
Fears of a sharp economic slowdown, persistent inflation in the United States and the difficult negotiations over raising the US debt ceiling therefore weighed on the European markets, which ended May in negative territory. Only the technology sector turned in a positive performance, led by semiconductors, which are well represented in our portfolios, and which surged on the back of Nvidia’s results and the prospects for the rise of artificial intelligence. Conversely, the energy sector corrected sharply, with the price of Brent crude reaching its lowest level since December 2021. Performances were also influenced by quarterly earnings announcements, which were good, but still with a notable asymmetry between the violence of the corrections caused by disappointments and the timid rises on stocks that published above expectations. 77% of the Digital Stars Europe companies that published their quarterly results saw their 2023 earnings estimates revised upwards, compared with 64% for the MSCI Europe, demonstrating the ability of our strategy to select stocks that surprise positively. In this bearish environment, the Digital Stars funds held up well, finishing close to their indices. Digital Stars Europe Acc posted a monthly performance of -2.2% compared with -2.5% for the MSCI Europe NR. Digital Stars Continental Europe Acc ended May at -2.4% compared with -2.3% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc posted a monthly performance of -3.9% compared with -2.5% for the MSCI EMU NR.
The rebalancing carried out in May was diversified, selecting stocks in the technology, consumer discretionary and air transport sectors, but also in non-cyclical sectors (healthcare and food). The outgoing stocks are mainly cyclical: energy, industrials and some banks. The fund’s profile is thus becoming slightly more defensive, and is adjusting to the economic slowdown. The overweight in banking stocks has been lowered to 5.9% in Digital Stars Europe, and the overweight in energy to 1.4%. Digital Stars Europe is also overweight financials, technology and industrials. The fund is underweight healthcare, consumer staples and utilities. Italy remains the fund’s largest holding and its largest overweight, at 15.1%, ahead of Germany (14.9%) and the United Kingdom (13.8%).
Digital Stars Europe Smaller Companies Acc ended down -2.3% in May, just ahead of the MSCI Europe Small Cap NR at -2.6%. The strong performances of some industrial stocks (Implenia, Munters group, NTG Nordic Transport Group) and Greek stocks (Piraeus Financial Holdings, Mytilineos) enabled the fund to offset the poor performance of energy transportation (d’Amico, D/S Norden, TORM, Stolt-Nielsen).
The monthly portfolio reviews focused on strengthening consumer discretionary, consumer staples, healthcare and IT sectors. Sales were mainly in banks, materials (copper), as well as media and energy.
The portfolio is still mainly overweight in consumer discretionary and energy, and significantly underweight in real estate and pharmaceuticals.
The United Kingdom (the most largely underweight country) weighs 17.4%, ahead of Italy (the most overweight country) at 16.0%, and Germany at 12.9%.
Digital Stars US Equities Acc USD was down -0.6% in May, vs. +0.6% for the MSCI USA NR and -1.8% for the MSCI USA Small Cap NR. This month’s underperformance came from the retail sector, whose good performance in the index is merely a mirage because Amazon is almost the only positive stock, but its weight is overshadowing the others.
The latest monthly portfolio review saw the addition of stocks across various sectors, with a particular focus on materials. Sales were mainly in financials and healthcare, as well as energy and real estate.
The portfolio remains overweight in industry. The underweight in media remains the most significant, followed by pharma.
Investment Monthly Report
April 2023
5 May 2023
Equity indices performed well in April (MSCI Europe NR +2.5%, MSCI USA NR +1.2%). Corporate quarterly earnings have been very supportive. However, after a significant improvement since September 2022, recent macro releases have been rather weak in the developed countries, reinforcing the likelihood of a recessionary scenario in the months to come. The banking troubles have also rekindled systemic fears and led investors to focus on defensive stocks with strong balance sheets, while at the same time lowering their expectations of rate hikes by central banks. Long-term rates have thus fallen by nearly 50 basis points on both sides of the Atlantic since the beginning of March, which also provides relative support for Visibility/Quality securities, often qualified as « proxy bonds ».
These fears of a sharp economic slowdown led to a clear outperformance of defensive sectors and an underperformance of cyclical stocks in April. The cyclical bias of the Digital Stars funds and their underweight in defensive mega-caps had a negative impact on performances. However, banking stocks rebounded from their March falls. Performance was also influenced at the end of the month by quarterly earnings announcements, but with a notable asymmetry between the violence of the corrections caused by disappointments (particularly in semiconductors) and the timid increases in stocks that surprised positively. At the end of April, 26% of Digital Stars Europe stocks had reported, and 72% of these companies had seen their estimated profits for 2023 revised upwards. The pace of earnings announcements will intensify over the coming weeks, which should refocus investors’ attention on company fundamentals and could be more supportive of our strategy. In this difficult environment, Digital Stars Europe Acc posted a monthly performance of -0.6% compared to 2.5% for the MSCI Europe NR. Digital Stars Continental Europe Acc ended April at -0.4% against 2.2% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved 0.5% against 1.5% for the MSCI EMU NR.
The rebalancing carried out in April was diversified, selecting stocks in the industrial, consumer discretionary and technology sectors, but also in non-cyclical sectors (healthcare, telecoms, and utilities). The outgoing stocks are mainly cyclical: Energy, Basic Materials and Banks. The fund’s profile is thus becoming slightly more defensive, adjusting to the economic slowdown. The overweight in banking stocks is lowered to 6.2% in Digital Stars Europe, while the overweight in energy is reduced to 2.9%. Digital Stars Europe is overweight financials, industrials, technology and energy. The fund is underweight in healthcare, food and utilities. Italy remains the fund’s largest weight and the largest overweight, at 16.4%, ahead of Germany (15.1%) and the UK (12.5%).
Digital Stars Europe Smaller Companies Acc ended down -1.0% in April, vs. +1.6% for the MSCI Europe Small Cap NR. The rebound of financials and the good publications of some stocks were not able to counteract the disappointing performance of our technology stocks.
The monthly portfolio reviews focused on strengthening specialty retail, IT, as well as energy and materials. Sales were mainly in industry and finance, as well as in healthcare and consumer staples.
The portfolio is still mainly overweight in consumer discretionary and energy, and significantly underweight in real estate and pharmaceuticals.
Italy (the most overweight country) weighs 17.9%, ahead of the United Kingdom (the most largely underweight country) at 16.2%, and Germany at 12.5%.
Digital Stars US Equities Acc USD was down -2.8% in April, vs. +1.2% for the MSCI USA NR and -1.4% for the MSCI USA Small Cap NR. The fund was affected by its IT holdings and its exposure to regional banks. Inter Parfums and e.l.f. Beauty continued their remarkable bullish run in April.
The latest monthly portfolio review saw stocks in the technology, healthcare equipment and real estate sectors enter the portfolio. Sales were mainly in banks, as well as in energy.
The portfolio remains overweight in industry, and has strongly reduced its over-exposure to (regional) banks. Media is still the most underweight sector.
Macro update – April 2023
14 April 2023
Investment Monthly Report
March 2023
11 April 2023
The banking sector’s woes reignited systemic fears in March. Volatility has made a comeback and is emerging from a long period of lethargy. At the same time, a powerful rotation within the stylistic and sectoral segments of the market occurred. The sharp drop in long-term yields, due to the increased risks of recession, also echoes a probable change in the pace of rate hikes by central banks. They now know the red line that must not be crossed in their monetary tightening. In this context, the Value segment, the big winner of the last 30 months, clearly underperformed in March due to its high exposure to Financials. Conversely, the “Visibility” style, which includes defensive, low-debt stocks with steady cash-flows, sometimes called « proxy-bonds », performed very well, both in absolute and relative terms.
After two months of gains for our funds, which benefited from positive surprises on stocks announcing their results, the situation was more complicated in March. The collapse of Silicon Valley Bank, followed by Credit Suisse, reshuffled the deck, with a crash in banking and energy stocks. Our exposure to banks, our cyclical bias and our underweight in defensive mega-caps weighed. The sector rotation was so violent that, unsurprisingly, the funds underperformed and gave back performance. With the actions of the Federal Reserve and the Treasury Department, and the takeover of Credit Suisse by UBS organised by the Swiss authorities, the market stabilised, as did the relative performance of the funds. It should be noted that no discretionary decisions were taken during this period. Our solid experience in managing Digital Stars funds has taught us that discretionary decisions, which do not follow the model, are not profitable. There is no reason to believe that this time would be any different. So we continued to apply our models strictly, as we have always done in previous crises. As risk aversion diminishes, investors should once again focus on company fundamentals and news flow, especially as we approach the first quarter earnings announcement period, which is usually a good time for our strategy.
In this difficult environment, Digital Stars Europe Acc posted a monthly performance of -4.5% against -0.1% for the MSCI Europe NR and -4.1% for the MSCI Europe Small Cap NR. Digital Stars Continental Europe Acc ended March at -3.6% against 0.8% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved -2.4% against 0.7% for the MSCI EMU NR.
Rebalancing in March was diversified, selecting stocks in the technology, consumer discretionary, healthcare and industrial sectors. Growth stocks are well represented in this selection. We stop to integrate financials as trends have been affected by the banking turmoil and some have been sold. The overweight in banking stocks has been reduced from 8.9% at the end of February to 6.9% in Digital Stars Europe. We are also selling energy and basic materials stocks. Digital Stars Europe is overweight financials, energy, industrials and technology. The fund is underweight healthcare, food and utilities. Italy remains the fund’s largest weight and the largest overweight, at 16.3%, ahead of Germany (15.5%) and the UK (13.3%).
Digital Stars Europe Smaller Companies Acc ended down -4.2% in March, in line with the MSCI Europe Small Cap NR at -4.1%. Positions in oil shipping and an underweight in real estate helped the fund overcome the impact of the banks.
The monthly portfolio reviews focused on strengthening IT and consumer discretionary. Sales were mainly in finance, as well as in energy and more defensive sectors like utilities or healthcare.
The portfolio is now mainly overweight in consumer discretionary and energy, as well as in banks, and significantly underweight in real estate and pharmaceuticals.
Italy (the most overweight country) weighs now 17.8%, ahead of the United Kingdom (the most largely underweight country) at 14.9%, and Denmark at 12.4%.
In a very divergent US market where the MSCI USA NR ended up +3.5% and the MSCI USA Small Cap NR -4.3%, Digital Stars US Equities Acc USD was down -3.7% in March. Significant exposure to regional banks had a strong impact on the fund, as did the under-exposure to technology mega-caps and the underperformance of our retail and oil companies. The good performance of Inter Parfums, e.l.f. Beauty and our healthcare stocks were not sufficient to compensate for this adverse effect.
The latest monthly portfolio review was diversified on the new entrant side. Sales were mainly in energy and consumer staples, as well as consumer discretionary.
The portfolio remains overweight in finance and industry, and underweight in media and pharmaceuticals.
Steel pipe supplier to oil giants gears up for the energy transition – Citywire
30 March 2023
Tenaris is a leading supplier of steel pipes to the oil and gas sector that is diversifying its customer base in response to the energy transition.
Chahine Capital was asked about the Tenaris investment case, written by Miles Costello for Citywire to provide quantitative insights.
This is not an investment recommendation.
Investment Monthly Report
February 2023
7 March 2023
European equity indices stood out again in February (MSCI Europe NR +1.8%), unlike the US indices (MSCI USA NR -2.4%). The spectacular upturn of China after the sudden withdrawal of the zero covid policy is having a positive impact on many European heavyweights. Moreover, the rise in interest rates tends to favour the most « value » geographical area, i.e. Europe. The improvement in economic momentum, linked to the reopening of the Chinese economy, is reflected in the economists’ consensus, which has recovered strongly. Eurozone GDP growth in 2023 is now forecast at +0.4% compared to -0.1% only 2 months ago. The same is true for the US, where GDP growth in 2023 is now forecast at +0.7% compared to +0.3% at the end of December.
Digital funds continued to rise in February, outperforming their benchmarks. Sector bets contributed positively, with overweight positions in energy and banks benefiting from higher interest rates. The portfolios also benefited from positive surprises on stocks announcing their results. Thus 73% of Digital Stars Europe stocks that reported earnings had their 2023 earnings estimates revised upwards, compared with only 46% of MSCI Europe stocks. The decrease in risk aversion has allowed a re-correlation between company news and performance, which is very favourable to our strategies. The stocks in the fund, that saw their 2023 outlook improve as a result of their announcements, achieved an average YTD return of +15.7%, compared to +2.2% only for those that were revised downwards. In this favourable environment, Digital Stars Europe Acc posted a monthly performance of +3.8% against +1.8% for the MSCI Europe NR, and a YTD performance of +9.2% against +8.7%. Digital Stars Continental Europe Acc ended February at +3.9% against +1.5% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved +4.3% against +1.6% for the MSCI EMU NR.
February rebalancing reinforces the cyclical bias of the funds. Thus, we have integrated stocks in the financials, basic materials, industrials and consumer discretionary sectors. Exposure to Energy (especially alternative energies) is slightly lowered, as for paper products and fertilisers. We are also selling defensive stocks in the consumer staples and cosmetics sectors. Digital Stars Europe is overweight financials (11%), energy (4.6%), and industrials (3.4%). The fund is underweight in healthcare (11.8%), consumer staples (9.5%) and utilities (1.5%). Italy remains the fund’s largest weight and largest overweight, at 17.1%, ahead of the UK (the most underweight country) at 13.4% and Germany (12.9%).
Digital Stars Europe Smaller Companies Acc ended up +6.0% in February, strongly outperforming the MSCI Europe Small Cap NR at +2.8%. The fund mainly benefited from good publications on companies active in energy storage and transportation, and on banks. The monthly portfolio reviews focused on strengthening consumer discretionary, materials and banks. Sales were mainly in industry, as well as in more defensive sectors linked to renewable energy (utilities, energy) or health care. The portfolio remains overweight in energy, banks and consumer discretionary, and significantly underweight in real estate, as well as IT and pharmaceuticals. The United Kingdom (the most largely underweight country) is now tied with Italy (the most overweight country) as the largest country weight at 15.9%, ahead of Denmark at 12.2%.
Digital Stars US Equities Acc USD was up slightly by +0.7% in February, in a falling market where the MSCI USA NR ended at -2.4% and the MSCI USA Small Cap NR at -1.8%. Capital markets stocks, consumer staples and consumer discretionary contributed very positively to the fund’s outperformance. The energy sector (-7% return in the US market) contributed negatively, due to its overweight. The latest monthly portfolio review strengthened IT and healthcare, as well as finance. Sales were mainly in consumer discretionary, as well as communication services, energy and materials. The portfolio remains overweight in finance and industry, and underweight in media, as well as pharmaceuticals and IT.
Capturing the stock “momentum” factor – Luxembourg Official
13 February 2023
“Chahine Capital’s algorithms revisit each month the investment case of more than 1,500 european stocks,” states Charles Lacroix, CEO of Chahine Capital. He tells us about the technology that supports the company activity.
Investment Monthly Report
January 2023
7 February 2023
Equity indices rose strongly in January (MSCI Europe NR +6.8%, MSCI USA NR +6.5%), extending the powerful rebound that began at the end of September 2022. There are many reasons for this increase. Inflation is falling faster than expected, which argues for a forthcoming easing of monetary policy, and China has abandoned its « zero covid » policy, which suggests a recovery in the global economy. It is therefore logical for equity indices to recover, especially as valuation was at a deep discount and investors were underinvested, according to sentiment indicators.
This prospect of « disinflation » led to a bullish rally in the first few days of January, concentrated on stocks which were negatively-sensitive to inflation and had been oversold in 2022. This rebound, fuelled by low momentum stocks, was only partially followed by Digital Funds despite a good sector allocation (overweight banks, industrials and technology). The second half of the month was more favourable to our strategy, which benefited from positive surprises on stocks announcing their results (Banco de Sabadell, Unicredit, SSAB, TGS, PGS, ASMI, etc.) and from exposure to banks. The improved visibility of central bank action, the decline in the level of macroeconomic uncertainty, and the upcoming intensification of corporate earnings announcements should allow a return to fundamentals in the markets. Along with a re-correlation of corporate earnings and future prospects with their stock market performance, these factors could lead to a favourable environment for stock picking by Digital funds.
Digital Stars Europe Acc posted a monthly performance of +5.3% against +6.8% for the MSCI Europe NR. Digital Stars Continental Europe Acc ended January at +5.6% versus +7.5% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved +6.4% versus +9.6% for the MSCI EMU NR.
Rebalancing in January continued to strengthen banking stocks. Financials have thus seen their weighting increased by 4.5% in one month and become the most overweight sector in Digital Stars Europe (26.5% against 17.4% in the MSCI Europe). We have also added some industrial, technology and commodity stocks. Exposure to Energy has decreased slightly. We are also selling defensive stocks in the food and healthcare sectors. The cyclical bias is reinforced. Digital Stars Europe is overweight financials (9.1%), energy (5.6%), and industrials (3.5%). The fund is underweight healthcare (11.2%), consumer staples (8%) and consumer discretionary (2.4%). Italy remains the fund’s largest weight and largest overweight at 16.6%, ahead of Germany (13%) and the UK (the most underweight country) at 12.5%.
Digital Stars Europe Smaller Companies Acc finished up at +1.2% in January, underperforming the MSCI Europe Small Cap NR at +7.4%. Stocks linked to energy transportation, the champions of the end of 2022, turned sharply downwards, preventing the fund from taking full advantage of the rebound in small caps. The share price of PNE lost 22% in just two days, following the decision of its main shareholder to finally abandon the sale of its stake.
The monthly portfolio reviews focused on strengthening financials, especially banks. Sales were mainly in IT and utility sectors, as well as in energy and healthcare.
The portfolio is significantly overweight in energy and industry, as well as in banks, and underweight in real estate, IT and pharmaceuticals.
The United Kingdom (the most largely underweight country) is still the largest country weight with 16.2%, ahead of Italy (the most largely overweight country) at 15.0%, and Denmark at 10.9%.
Digital Stars US Equities Acc USD rose by +6.3% in January, vs. +6.5% for the MSCI USA NR and +10.4% for the MSCI USA Small Cap NR. The underweight in healthcare, as well as the remarkable performance of some consumer staples (Inter Parfums) and industrial (CECO Environmental, MRC Global) stocks, helped to offset the underperformance of the regional banks held in the portfolio.
The latest monthly portfolio review strengthened once more the consumer discretionary sector (retailing), as well as steel, food and energy (equipment). Sales were mainly in industrials and finance, as well as communication services.
The portfolio remains overweight in finance and industry, and underweight in pharmaceuticals, as well as media and IT.
Macro update – January 2023
9 January 2023
Investment Monthly Report
December 2022
31 December 2022
Equity indices fell in December and ended the powerful rally seen since the end of September. As we approach 2023, equity markets, which are 12 months ahead of the real economy, now have their eyes on 2024. 2023 will undoubtedly be a difficult year on the economic front with an expected recession. However, with an almost 5% increase in earnings in 2022 coupled with a c. 20% decline in US indices, it seems to us that a tough scenario was already anticipated by the markets last year, and that the weaker improvement in visibility, could continue to support a US equity market whose valuation is close to the historical average, as we have seen since end September.
In this bearish environment, financial stocks held up particularly well, benefiting from rising interest rates and earnings estimates that were again revised upwards. Conversely, cyclical sectors (energy, basic materials, consumer discretionary) suffered amid fears of a coming recession. Technology, which had rebounded in November, was the worst performer with a decline of 8.8% in December, ending a year of devaluation at -28.7%. The Digital funds’ exposure to banking stocks compensates its cyclical and technology bets and explains a monthly performance close to their benchmarks. Digital Stars Europe Acc posted a monthly performance of -3.8% against -3.5% for the MSCI Europe NR. Digital Stars Continental Europe Acc (formerly Digital Stars Europe Ex-UK Acc) ended December at -2.8% versus -3.4% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved -1.7% versus -3.6% for the MSCI EMU NR.
Rebalancing in December continued to strengthen banking stocks, which represent almost half of the stocks introduced. Financials have seen their weighting increased by 4.5% in one month and become the second overweight in Digital Stars Europe. We have also integrated some industrial stocks. The exposure to basic materials is lowered again. We are also selling defensive stocks in food (production or distribution), cosmetics and healthcare. Digital Stars Europe is overweight energy (5.8%), financials (5.2%) and technology (3.5%). The fund is underweight in healthcare (10.3%), consumer staples (7.1%) and consumer discretionary (2.4%). Italy becomes the fund’s top weight at 12.4%, ahead of the United Kingdom (the most underweight country) at 12.3% and Germany (11.2%).
Digital Stars Europe Smaller Companies Acc finished down at -1.8% in December, outperforming the MSCI Europe Small Cap NR at -2.5%. The year 2022 ended with an excess return of +2.6% for the fund (-19.9% vs. -22.5% for the index). In December, the good performance of the fund in relative terms comes mainly from marine transportation and other industrials. They offset the underperformance of energy.
The monthly portfolio reviews focused on strengthening industrials and financials. Sales were mainly in energy, utilities and healthcare.
The portfolio is significantly overweight in energy and industry, as well as in utilities, and underweight in real estate. The weight of finance is now aligned to the index.
The United Kingdom (the most largely underweight country) is still the largest country weight with 16.2%, ahead of Italy (the most largely overweight country) at 12.2%. Norway weighs 10.2%, and is the 2nd most overweight country, behind Italy.
Digital Stars US Equities Acc USD fell by -7.5% in December, behind the MSCI USA NR at -5.9% and the MSCI USA Small Cap NR at -6.0%. The fund’s good positioning (underweight) in technology and media was not enough to offset the main sources of underperformance: healthcare, as well as industrials and banks.
The latest monthly portfolio review strengthened consumer discretionary, as well as technology, telecoms and healthcare. Sales were mainly in industrials and energy, as well as food.
The portfolio remains significantly overweight in finance and industry, and underweight in pharmaceuticals, as well as technology and media.
Investment Monthly Report
November 2022
8 December 2022
In November equity indices continued their strong rebound, first initiated in October. The MSCI Europe NR index and the S&P 500 NR rose by +6.9% and +5.5% respectively. Since the 2022 market lows seen in mid-October, the rise in the US and Europe has been substantial (circa +15%). A combination of positive factors is behind this spectacular rise. Economic momentum is rebounding, due in particular to confidence indicators that are recovering from historic lows in some cases. Inflation is falling faster than expected in the US, and this reinforces the likelihood of a scenario where central banks cut rates as early as 2023. China could relax its « zero covid » policy, which is hampering global exchanges. Finally, Q3 earnings publications have been solid and highlight the « cheap » valuation of equities.
This monthly rise was driven by growth stocks (technology, consumer discretionary), which benefited from the decline in long-term rates. Conversely, defensive sectors with lower beta (food, telecom and healthcare), as well as the energy sector, posted the weakest performances. The U.S. inflation figures published on November 10, showing a slowdown and thus lowering expectations of rate hikes, triggered two days of violent rebounds in low momentum stocks. The European technology sector, which was down 28% since the beginning of the year on November 9, jumped 9% in two days. The markets then normalized, partially correcting the excesses of these two days. Digital Stars Europe Acc posted a monthly performance of +5.6% against +6.9% for the MSCI Europe NR, the underperformance being attributable to the phenomenon of reversion to the mean observed in the middle of the month. Digital Stars Continental Europe Acc (formerly Digital Stars Europe Ex-UK Acc) ended November at +5.3% versus +7.1% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved +4.7% versus +8.4% for the MSCI EMU NR.
The rebalancing carried out in November was diversified. Financial stocks (banks and reinsurers) were reinforced. We also integrated some industrial, technology and healthcare stocks. Exposure to basic materials was lowered slightly. The price momentum has also taken out some underperforming energy stocks this month. Digital Stars Europe is overweight energy (6%), technology (3.5%) and basic materials (2.5%). The fund is underweight in healthcare (10.5%), consumer staples (4.6%) and consumer discretionary (2.8%). The United Kingdom is the largest weighting at 13.9%, ahead of Germany at 10.8% and the Netherlands at 10.8%.
The upward trend has also benefited small and medium-sized stocks: Digital Stars Europe Smaller Companies Acc finished up at +4.6% in November, compared to +6.3% for the MSCI Europe Small Cap NR. The underperformance stems from the violent upturn on 10-11 November, which mainly favoured technology stocks. Some stocks in the industrial, energy, and materials sectors also weighed negatively on the fund’s appreciation.
The monthly portfolio reviews focused on strengthening healthcare, as well as industry, finance and consumer staples. Sales were mainly in materials and utilities.
The portfolio is still significantly overweight in energy, as well as in utilities and industry, and underweight in real estate and finance.
The United Kingdom (the most largely underweight country) is still the largest country weight with 16.5%, ahead of Germany (12.6%). Norway now weighs only 8.3%, and is only the 3rd most overweight country, behind Italy and Denmark.
Digital Stars US Equities Acc USD returned +2.1% in November, behind the MSCI USA NR at +5.4% and the MSCI USA Small Cap NR at +4.1%. Strong performances from technology and consumer cyclicals were not enough to offset the strong underperformance of banks.
The latest monthly portfolio review strengthened technology and consumer staples, and reduced consumer discretionary and real estate.
The portfolio remains significantly overweight in banks, industrials and energy, and underweight in pharmaceuticals, technology and media.
Elite stock: Top investors bank on a cashflow king – Citywire
22 November 2022
Chahine Capital was asked about the Ipsos investment case, written by Miles Costello for Citywire Wealth Manager, to provide quantitative insights.
Investment Monthly Report
October 2022
7 November 2022
Equity indices rebounded strongly in October, returning to their early September levels. For the fifth month in a row, we can observe a variation in absolute terms of more than 5% in the European indices. This has not been observed since October 1997. The same kind of phenomenon can be spotted on the other side of the Atlantic.
While the macro-economic context remains gloomy and dominated by inflation, which is still rising in Europe to double digits and which is falling only very modestly in the United States, investors have preferred to focus on attractive fundamentals during this quarterly publication period. Furthermore, the expectation of an accommodative Fed pivot as early as Q2 2023 is growing and is fuelling the idea that the recession will be short-lived and that the peak of inflation in the US is now behind us.
This monthly rise was driven by cyclical sectors, led by the energy sector, which has been the only positive sector since the beginning of the year. Defensive stocks rose to a lesser extent. The difficulties of the semiconductor sector, impacted by the disappointing results of TSMC and the export control measures imposed by the United States on China, should be noted. Digital Stars Europe Acc joined this market rebound and posted a monthly performance of +5.7% compared to +6.2% for the MSCI Europe NR. Digital Stars Continental Europe Acc (formerly Digital Stars Europe Ex-UK) ended October at +6% compared to +6.6% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved +6.4% against +7.9% for the MSCI EMU NR.
The rebalancing carried out in October was diversified, favouring large caps. Banks were reinforced. We also integrated some defensive stocks and luxury goods. Exposure to commodities was slightly lowered. The price momentum has moved out of telecom stocks, as the fund continues to adapt to a higher interest rate environment. Digital Stars Europe is overweight energy (7%), technology (3.3%) and basic materials (3%). The fund is underweight in healthcare (10.8%), consumer discretionary (3.5%) and consumer staples (3.3%). UK is the largest weighting at 14.9%, ahead of Germany at 11.7% and the Netherlands at 11%.
The rebound particularly benefited small and mid caps, allowing Digital Stars Europe Smaller Companies Acc to finish up at +8.6% in October, compared to +7.0% for the MSCI Europe Small Cap NR. The fund’s good performance continues to be led by the energy sector. Some marine transportation stocks are performing remarkably well, as well as others driven by their good news flow.
The monthly portfolio reviews focused on strengthening industrials, as well as media and materials. Sales were mainly in consumer cyclicals (textile and apparel).
The portfolio is still significantly overweight in energy, as well as in utilities, and underweight in real estate, finance and pharmaceuticals.
The United Kingdom (the most largely underweight country) is still the largest country weight with 16.6%, ahead of Germany (12.0%). Norway’s weight sits at 9.9%, and the country remains the most largely overweight.
Digital Stars US Equities Acc USD returned +11.6% in October, outperforming the MSCI USA NR at +7.9% and the MSCI USA Small Cap NR at +10.3%. Energy was the best performing sector in the fund over the month. Good news flows benefited some of the fund’s stocks, notably in industry and finance.
The latest monthly portfolio review, which was fairly diversified, strengthened financials, energy and materials, and reduced retail, industrials and technology.
The portfolio is significantly overweight in banking, industrials and energy, and underweight in technology, pharmaceuticals and media.
« Digital Stars Europe Ex-UK » becomes « Digital Stars Continental Europe »
21 October 2022
Chahine Capital, a pioneer in quantitative Equity « Momentum » since 1998, has renamed its Digital Stars Europe Ex-UK fund to Digital Stars Continental Europe.
Launched in 2006, Digital Stars Continental Europe is an All Caps European equity fund, which aims at outperforming Europe ex-UK markets by identifying, through proprietary quantitative models, « star » companies, those with the ability to repeatedly surprise investors positively.
Macro update – October 2022
10 October 2022
Investment Monthly Report
September 2022
7 October 2022
September was a challenging month for equity indices, which are now trading below their early March lows in Europe and below their June lows in the US. This decline has been global, and the various equity styles suffered uniformly, a sign that macroeconomic news has dominated investors’ minds and taken the lead over more fundamental and microeconomic considerations. Inflation releases have been disappointing and economic momentum continues to deteriorate, mainly due to sharp rises in key interest rates by central banks, in their efforts to tackle inflation. It is important in this depressed environment to remember that the best investment opportunities take root in times of crisis and there is no reason why the current period should be any different. There are many reasons for this. Sentiment indicators are down and some are at historic lows – a traditionally contrarian indicator, which suggests that a lot of bad news is already priced in. Central banks are expected to reverse their monetary policy towards a more accommodative stance as early as Q2 2023, according to the shape of the yield curves. Finally, valuations are at levels not seen for a long time. In the US, 12-month forward P/E is 15.3x compared with a historical average of 16.3x since 2000. In Europe, the discount is as high as 25% (current P/E of 10.5x vs. historical average of 14.0x).
These market falls have led investor expectations of a recession to have risen sharply. Cyclical stocks (Technology, Industrials – especially shipping) have suffered, while defensive stocks (Food, Health) held up well. Banks, benefiting from rising interest rates, also slightly outperformed the indices. In this risk-averse environment, small and mid-caps were particularly affected, with only the large defensive caps limiting their losses. As may appear logical; the absence of a stable trend and the weak influence of news flow and company fundamentals on stock performances, constitute an unfavourable environment for our momentum approach. October will be marked by the announcement of half year results, a period that is usually favourable to our strategy, especially as the stocks in the portfolio continue to see their estimated profits revised upwards.
The full month performance of Digital Stars Europe Acc is -9.5% compared to -6.3% for the MSCI Europe NR and -10.9% for the MSCI Europe Small Cap NR. The main explanation for the monthly underperformance comes from the fund’s underweight in mega-caps, and the necessary exposure to small and mid-caps to identify Stars.
Digital Stars Continental Europe Acc (formerly Digital Stars Europe Ex-UK) ended September at -9.2% compared to -6.2% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved -8.9% against -6.3% for the MSCI EMU NR.
The September rebalancing has a non-cyclical bias. Food and health care stocks were included, while exposure to basic materials, shipping and semiconductors was reduced. A few banks were also included. Digital Stars Europe is overweight energy (7.8%), basic materials (3.8%), and technology (3.2%). The fund is underweight in healthcare (10.2%), food (4.6%) and consumer discretionary (3.7%). Germany is the largest weighting at 13.3%, ahead of the UK at 13.2% and Norway at 9.6%.
Digital Stars Europe Smaller Companies Acc finished down at -9.9% in September, resisting well the -10.9% drop of the MSCI Europe Small Cap NR. The fund’s relative resilience is mainly due to industrials (PNE, Implenia, BIC) and financials (Jyske Bank, Valiant Holding). Apart from a few standout stocks (TORM, Energean), energy and materials have penalised the fund.
The monthly portfolio reviews focused on strengthening insurance, industry and consumer discretionary. Sales have mainly occurred in food.
The portfolio is still significantly overweight in energy, as well as in utilities, and underweight in real estate, media and finance.
The United Kingdom (the most largely underweight country) is still the largest country weight with 19.3%, ahead of Germany (12.6%). Norway’s weight was reduced to 9.4%, but the country remains the most largely overweight.
Digital Stars US Equities Acc USD finished -6.9% lower in September, ahead of the MSCI USA NR at -9.3% and of the MSCI USA Small Cap NR at -9.5%. The healthcare sector (pharma) held up best in the US equity market, but the portfolio was under-represented. It was mainly a few financial stocks that helped the fund hold up well in the general downturn.
The latest monthly portfolio review strengthened IT, as well as industry, real estate and healthcare. Consumer discretionary has been reduced further (especially retailing), as well as to a lesser extent materials, food and energy.
The portfolio is clearly overweight in industry and banks, and underweight in IT, pharmaceuticals and media.
Notice to shareholders of the sub-fund Digital Funds Stars Europe Ex-UK
3 October 2022
Dear Shareholder,
Notice is hereby given to you, as shareholders of the Sub-Fund “Digital Funds Stars Europe ex-UK” of the Fund, that the Sub-Fund will be renamed to “Digital Funds Stars Continental Europe” as of 27
September 2022.
This name change will have no impact on the Sub-Fund’s investment policy or its investment process, which remain unchanged.
Furthermore, this name change will have no impact on the ISIN codes, Bloomberg tickers or any other characteristics of the Sub-Fund’s share classes.
Investment Monthly Report
August 2022
6 September 2022
After an encouraging rebound for markets in July, equities resumed their downward trend in August. The MSCI Europe NR and the MSCI USA NR gave up -4.9% and -4.0% respectively over the month. Since the beginning of the year, the decline has reached -11.8% in Europe and -17.4% in the US. The sharp drop in global economic momentum, a lack of geopolitical visibility and tightening of monetary policies in an inflationary context are all elements that have led investors to favour a cautious approach. What is likely to dictate the direction of the markets in the coming weeks is the evolution of inflation. In the spring, central bankers started a race against the clock to contain the contagion effects of inflation, which at this stage is still mainly caused by the rise in commodity and energy prices, a phenomenon that is exogenous in nature. If this race against time is won, we can expect central banks to adopt a more accommodating monetary policy again, perhaps as early as 2023, which would benefit equity markets that are highly undervalued compared to their historical standards, especially in Europe.
The financial markets continued to rebound in early August with little volatility. But the Fed’s determination to fight inflation at all costs led to a violent correction from mid-August onwards. Digital funds ended the month down but resisted well relative to their benchmarks. The overweight in the energy sector and the continuation of half-year corporate earnings announcements explain this slight outperformance. The portfolios benefited from numerous announcements that exceeded expectations (u-blox Holding, Glanbia Plc, TORM PLC, OCI NV, etc.).
The full month performance of Digital Stars Europe Acc is -4.5%, compared to -4.9% for the MSCI Europe NR. Digital Stars Europe Ex-UK Acc ended August at -4.3% compared to -5.1% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved -5.9% against -5% for the MSCI EMU NR.
Rebalancing in August increased exposure to the energy sector but lowered exposure to basic materials. We are also integrating some more defensive stocks in food, telecoms and cosmetics. We are selling mostly cyclical stocks in the industrial and basic materials sectors.
Digital Stars Europe is overweight energy, basic materials and technology. The overweight in energy is 7.3%. The fund is underweight in healthcare and food. The UK remains the largest weighting at 15%, ahead of Germany at 12.1% and Norway at 10.3%.
Digital Stars Europe Smaller Companies Acc finished down at -4.6% in August, resisting well the -6.9% drop of the MSCI Europe Small Cap NR. The outperformance was due to the overweighting of the energy sector, the only positive sector in the month, and to the good results published by some companies. An underweight position in financials negatively impacted the fund.
The monthly portfolio reviews focused on strengthening pharma, consumer cyclicals and energy. Sales were mainly in technology and materials (mainly metals).
The portfolio is still significantly overweight in energy, as well as in utilities, and underweight in real estate, finance and industry.
The United Kingdom (the most largely underweight country) is the largest country weight with 20.8%, ahead of Norway with 13.9% (the most largely overweight country).
Digital Stars US Equities Acc USD finished -2.7% lower in August, ahead of the MSCI USA NR at -4.0% and in line with the MSCI USA Small Cap NR at -2.6%. The underweight in technology benefited the fund in relative terms, as did the strong performance of consumer discretionary stocks, particularly in retail.
The latest monthly portfolio review strengthened energy and industry, as well as communication services. Consumer discretionary has been heavily reduced (especially retailing), as well as to a lesser extent chemicals and pharmaceuticals.
The portfolio is clearly overweight in banks and industry, and underweight in IT, pharmaceuticals and media.
Investment Monthly Report
July 2022
4 August 2022
The second half of the year is kicking off with a bang for equity investors (Stoxx 600 NR +6.1%, S&P 500 NR +9.2%) and this contrasts with the trend observed during the first half of the year. The month of July thus marks a break for the financial markets. Equities are rising, interest rates are falling, as are commodity and energy prices. A shift can also be seen within the major stock styles. Growth, for example, has put an end to a long sequence of declining multiples, ranking first among the styles over the month thanks to the rebound of technology, luxury and retail stocks. Conversely, Value, after underperforming in June, underperformed again in July, hurt by the relatively poor performance of the financials, telecoms and mining sectors, but remains so far the best style since the beginning of the year.
The financial markets continued to fall at the beginning of July, with fears oscillating between recession and inflation. They then rebounded strongly from 5 July, buoyed by the stimulus measures in China, the fall in interest rates and, above all, the announcements of half-yearly company results. These announcements refocused investors’ attention on company news flow and fundamentals. The environment then became much more favourable for Digital Stars funds. After losing 3.3% over the first 5 days of July, Digital Stars Europe has rebounded by 13.4% since 5 July and ended the month 2.1% ahead of its benchmark. Portfolios benefited from numerous announcements that exceeded expectations (Hapag Lloyd, Truecaller, Hexatronic, Norske Skog, Elkem, Sartorius Stedim, etc.). Industrials (mainly shipping) and technology were our big winners of the month, while financials were negatively impacted by the announcement of a super-tax in Spain and political uncertainty in Italy. The full month performance of Digital Stars Europe Acc is +9.7%, compared to +7.6% for the MSCI Europe NR. Digital Stars Europe Ex-UK Acc ended July at +9.1% compared to +8% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved +7.5% against +7.3% for the MSCI EMU NR.
Rebalances in July were diversified. They are more influenced by company news flow than by sector trends. They mainly included stocks in the renewable energy, healthcare, food, telecom and technology sectors. We are selling mostly cyclical stocks in the industrial, basic materials and financial sectors.
Digital Stars Europe is overweight basic materials, energy and technology. The overweight in basic materials is again lowered to 6.5%. The fund is underweight food and healthcare. The UK remains the largest country weight at 15.7%, ahead of Germany at 12% and Norway at 9.8%.
Digital Stars Europe Smaller Companies Acc ended up at +10.8% in July, ahead of the MSCI Europe Small Cap NR at +9.8%. The rebound initiated on July 5th has been driven by earnings announcements (Hexatronic, Norske Skog, Incap, Hanza). The fund was supported by the good performance of transportation and technology.
The monthly portfolio reviews focused on strengthening renewables (industrials and utilities), as well as healthcare and consumer discretionary. Sales were mainly in financials and materials (primarily metals), as well as technology.
The portfolio is still significantly overweight in energy, as well as in utilities, and underweight in real estate, industry and finance.
The United Kingdom (the most largely underweight country) is the largest country weight with 21.5%, ahead of Norway with 14.6% (the most largely overweight country).
Digital Stars US Equities Acc USD ended up +11.0% in July, ahead of the MSCI USA NR at +9.3% and the MSCI USA Small Cap NR at +10.6%. The fund’s performance was driven by technology (particularly semiconductors), construction-related industries (construction, materials, materials wholesalers, timber, etc.), and medical services. Insurance and specialty retailers suffered.
The latest monthly portfolio review strengthened finance, energy and industry, as well as consumer goods. Technology has been heavily reduced (especially semiconductors), as have materials and real estate.
The portfolio is overweight in banks, industry, and consumer discretionary, and underweight in IT, pharma and media.
Macro update – July 2022
19 July 2022
Digital Stars Eurozone fund granted the Belgian « Towards Sustainability » label
19 July 2022
After the French Label ISR in March, Digital Stars Eurozone fund has been granted the Belgian « Towards Sustainability » label. This second sustainability label is a further recognition of Chahine Capital’s sustainable investment approach and its concrete achievements.
Delivered for a renewable period of one year, the « Towards Sustainability » label was developed by Febelfin, the Belgian federation of financial institutions, in collaboration with financial sector stakeholders and independent experts. The label has three requirements:
-Transparency;
– ESG (environmental, social and governance) analysis on all portfolios;
– Exclusions with low thresholds, not only on coal but also on non-conventional fossil fuels.
Investment Monthly Report
June 2022
6 July 2022
Equity indices closed the final month of the first half of the year with a sharp decline (MSCI Europe NR -7.7%, MSCI USA NR -8.3%). Concerns about economic growth led investors to adopt a cautious stance. To counter inflation, which is no longer transitory, central banks have started a race against the clock. They are sharply raising interest rates and tightening monetary policy in order to slow down activity and bring down the price of energy and commodities, which are still the main contributors to price increases at this stage. The CRB All Commodities index thus dropped -5.2% in June, its biggest monthly decline since March 2020 and the Covid crash and allowed inflation expectations to ease sharply. The monetary tightening could be only temporary and a return to a more « Dovish » policy, as early as 2023, should not be excluded. Such a scenario would be favourable for equities in a medium/long-term perspective, while the technical secular supports (2000 and 2007 highs in Europe) remain valid, and valuation is attractive ahead of the Q2 quarterly publications.
Investors’ fears fluctuated between inflation, tightening monetary policy and a possible future recession. In this environment of strong risk aversion, cyclical stocks, including commodities and energy, which had benefited from positive momentum following the invasion of Ukraine and were well represented in our portfolios, suffered particularly badly, which means a new trend break for the year 2022. Only the defensive large caps limited their losses. The absence of a stable trend, the weak influence of news flow and company fundamentals on stock performances, logically constitute an unfavourable environment for our momentum approach. July will be marked by the announcement of half year results, a period that is usually favourable to our strategy, especially as the stocks in the portfolio continue to see their estimated profits revised upwards. The full month performance of Digital Stars Europe Acc is -13%, compared to -7.7% for the MSCI Europe NR. Digital Stars Europe Ex-UK Acc ended June at -13.6% compared to -8.2% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved -9.9% against -9.2% for the MSCI EMU NR.
Influenced by the current risk aversion, the June rebalancing mainly included defensive stocks in the healthcare, food and telecoms sectors, but also some financials and energy stocks. We are selling mostly cyclical stocks in the industrial and technology sectors.
Digital Stars Europe is overweight basic materials, industrials, technology and energy. The overweight in basic materials is slightly lowered to 8%. The fund is underweight food and healthcare. The UK remains the largest country weight at 13.1%, ahead of Germany at 12.4% and France at 10.4%.
Digital Stars Europe Smaller Companies Acc ended down at -9.8% in June, but held up well against the sharp fall of small caps (MSCI Europe Small Cap NR at -11.8%). The drop came mainly from materials and industry (transportation). The relative strength of utilities, semiconductors and retail helped the fund, as did strong M&A activity during the month.
The monthly portfolio reviews focused on increasing the food, materials, utilities and media. Sales occurred mainly in technology, financials and industrials.
The portfolio is significantly overweight in energy, as well as in materials and utilities, and underweight in industry and real estate, as well as in health care.
The United Kingdom (the most largely underweight country) is the largest country weight with 21.6%, ahead of Norway with 14.8% (the most largely overweight country).
Digital Stars US Equities Acc USD ended down -9.6% in June, behind the MSCI USA NR at -8.3% and the MSCI USA Small Cap NR at -9.1%. The fund was particularly affected by some industrials, semiconductors, and construction-related stocks (construction, materials, materials wholesalers, timber, etc.). The financial sector performed well in relative terms.
The latest monthly portfolio review was quite defensive in nature, strengthening consumer staples and health care, and decreasing consumer discretionary (retailing) and industry.
The portfolio is overweight in banks, consumer discretionary and industry, and underweight in pharma and media.
Investment Monthly Report
May 2022
8 June 2022
Nearly two and a half years after the discovery of the Coronavirus, we continue to observe a rare succession of major economic, monetary, geopolitical and health events, and this seems to have accelerated over the past year. On the health front, the Delta and Omicron variants have forced governments to implement the largest vaccination campaigns in history, and, in the case of China, to recently re-confine 300 million people. The war in Ukraine is emerging as one of the most important geopolitical events of the post-war era. Finally, powerful reflation, fueled by exogenous health and military shocks, is pushing central banks to adjust their accommodating monetary policies. In this unstable environment and lacking short-term visibility, equities gave up -0.8% in Europe in May (MSCI Europe NR). However, the earnings revisions by the analysts’ consensus continue to be well oriented (EPS 2022 MSCI Europe raised by +9.2% since the beginning of the year). The fundamental situation therefore remains favourable. The risk premium for the European market stands at +6.5%, well above the historical average of +5.0%.
Financial markets fell in early May. After Shanghai, new anti-covid measures were implemented in Beijing. The resulting negative impact of these lockdowns on global growth strongly affected Basic Materials stocks, one of the main overweights in our portfolios. The technology sector also corrected. Reassuring macro-economic figures in the US (industrial production, consumption) initiated a rebound that continued in line with the gradual lifting of the lockdown in Shanghai. The Digital Stars funds suffered in the first days of May before recovering. Digital Stars Europe Acc posted a month to date performance of -8.8% on 12 May, compared with -5.3% for the MSCI Europe NR. It then rebounded stronger than the index (+5.9% compared to +4.7% since 12 May), recovering part of the relative drawdown. The full month performance of Digital Stars Europe Acc is -3.4%, compared to -0.8% for the MSCI Europe NR. Digital Stars Europe Ex-UK Acc ended May at -2.8% compared to -1.1% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved -1.6% against 0.6% for the MSCI EMU NR.
With oil prices still at their highest, the May rebalancing again included Energy and Paper Pulp stocks, but also Financials and Healthcare stocks. We are mainly selling “growth” stocks in the industrial sectors and real estate companies, which are suffering from higher interest rates.
Digital Stars Europe remains overweight in Basic Materials, Industrials, and Technology and is becoming overweight Energy. The overweight in commodities remains close to 9%. The fund is underweight in Food and Healthcare. The UK remains the largest weight at 14.7%, which is a clear underweight, ahead of Germany at 14.5% and Norway at 11.3%.
Digital Stars Europe Smaller Companies Acc ended down at -2.7% in May, behind the MSCI Europe Small Cap NR at -1.7%. The German government’s criticisms on biofuels affected VERBIO, preventing the fund from taking full advantage of the good performance of the energy sector. Some positive publications by companies in renewable energy, technology, finance and materials sectors benefited the fund.
The monthly portfolio reviews focused on materials, as well as healthcare, energy and industrials. Most of the sales concerned banks, and to a lesser extent consumer discretionary, software and food.
The portfolio is significantly overweight in energy and technology, and underweight in real estate and industrials.
The United Kingdom (the most largely underweight country) is the largest country weight with 19.1%, ahead of Norway with 17.5% (the most largely overweight country).
Despite a turbulent US market in May Digital Stars US Equities Acc USD ended the month flat, in line with the MSCI USA NR at -0.3% and the MSCI USA Small Cap NR at +0.1%. The energy sector was the best performer, but the fund benefited most from technology, particularly semiconductors. Conversely, real estate was a major detractor for the fund.
The latest monthly portfolio review strengthened technology, materials, industrials and consumer discretionary, and reduced financials, healthcare and energy.
The portfolio is overweight in industrials, retail and banks, and underweight in pharma, media and technology.
Investment Monthly Report
April 2022
11 May 2022
Inflation is reaching record levels, interest rates are tightening, war is taking hold in Europe and 180 million Chinese are being confined, meanwhile, the MSCI Europe NR index has only lost -5.9% in the first 4 months, including -0.6% in April, and is far more resilient than the bond indices. The headwinds are numerous and logically weigh on the psychology of investors. The temptation to be puzzled is great in such a context, which is why we feel it is important to share the main elements and signals that can be extracted from our « Top-Down » analysis. Our Economic Momentum indicator has fallen in 3 months from 61 (out of 100) to 42. The consensus of economists now expects GDP growth in the Eurozone to be +2.9% in 2022, compared to +4.4% 6 months ago. Q1 growth was +0.2%, and still signals an expansion. The recession is only materializing at this stage in the collapse of the sentiment indicators, which are approaching their historical lows. The Zew Expectation Eurozone is close to the levels of October 2008, November 2011 and March 2020, all good entry dates for investors. Despite the pressure on long-term interest rates, the risk premium on the European equity market remains intact. The decline in indices, coupled with expected earnings growth of +11.6% in 2022 has compensated. Thus, the risk premium of the STOXX Europe 600 index stands at +6.5%, a generous level compared to the average since 2000 of 5.0%. It should also be noted that the 2022 Earnings Momentum remains surprisingly well oriented. Finally, the behavioural dynamics are deteriorating as the major international indices broke through their 200-day moving averages in April. However, the strength of the major European indexes’ support (2000 and 2007 highs), which was tested in early March before triggering a powerful rebound, is a positive signal for the medium/long term.
Relatively stable at the beginning of April, the financial markets fell violently at the end of the month due to the escalation of the Ukrainian conflict, the lack of prospects for a diplomatic agreement, but also the lockdowns in China following the rise in Covid cases. The expected negative impact of these lockdowns on global growth notably halted the rise in energy and basic materials stocks. Digital Stars funds ended April lower. Growth stocks, technology (especially semiconductors) and industrials were among the worst contributors this month. Defensive stocks (telecoms, food, utilities) are the winners. The monthly performance of Digital Stars Europe Acc is -2.3%, compared to -0.6% for the MSCI Europe NR. Digital Stars Europe Ex-UK Acc ended April at -3.0% compared to -1.3% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved -3.0% against -1.9% for the MSCI EMU NR.
The rebalancing in April was influenced by the conflict in Ukraine and the lockdowns in China. The model therefore mainly included Basic Materials and Energy stocks in the middle of the month, but moved towards more defensive stocks (Telecoms, Healthcare, Utilities) at the end of the month. We are selling cyclical stocks in the industrial, semiconductor and financial sectors.
Digital Stars Europe remains overweight in Basic Materials, Industrials, Technology and Financials. The overweight in Basic Materials increases, again, to 9%. The fund is underweight in Food and Healthcare. The UK remains the largest weighting at 15.3%, ahead of Germany at 14.8% and Sweden at 10.9%.
Digital Stars Europe Smaller Companies Acc ended down at -2.5% in April, slightly behind the MSCI Europe Small Cap NR at -1.9%. Three sectors stood out in terms of performance: materials (K+S, Elkem), utilities (Telecom Plus) and food (Grieg Seafood, Tate & Lyle). Healthcare equipment (Medartis, Ypsomed), technology and transport (MPC Container Ships, Wallenius Wilhelmsen) were the most affected.
The monthly portfolio reviews focused on energy and financials, as well as materials and utilities. Most of the sales were in technology and industrials, and to a lesser extent in healthcare and consumer staples.
The portfolio is significantly overweight in energy and technology, and underweight in industrials, as well as in real estate, healthcare and media. The United Kingdom (the most largely underweight country) is the largest country weight with 19.9%, ahead of Norway with 14.3% (the most largely overweight country).
Digital Stars US Equities Acc USD ended April down -8.9%, vs. -9.1% for the MSCI USA NR, and -8.4% for the MSCI USA Small Cap NR. Despite this general downturn, retailing recovered partially in the fund, allowing it to mitigate the impact. Some stocks in the sector even finished the month positive (AutoNation, Penske Automotive, MarineMax). The sharp decline in semiconductors pushed some of its stocks out of the portfolio (Alpha & Omega, Synaptics).
The latest monthly portfolio review strengthened energy, materials and real estate, and reduced financials, consumer discretionary, media and healthcare.
The portfolio is still overweight in banks, industrials and retailing, and underweight in media, technology (software) and pharmaceuticals.
Chahine Capital granted a record number of awards at Refinitiv Lipper Fund Awards 2022
6 May 2022
Chahine Capital, a European pioneer in quantitative equity Momentum strategies, has been granted this year more than a dozen of Refinitiv Lipper Fund Awards, one of the most prestigious
awards in the fund management industry.
Chahine Capital was granted the Best Group over 3 years award in the Equity Small Company category in five geographical areas: Europe, Austria, Germany, Switzerland and the UK.
Source of the picture: https://www.refinitiv.com/perspectives/market-insights/celebrating-the-lipper-fund-awards-2022-winners/
Macro update – April 2022
19 April 2022
Investment Monthly Report
March 2022
5 April 2022
Equity indices rose in March (MSCI Europe NR +0.8%, MSCI USA NR +3.5%), above their pre-Ukraine invasion levels. The YTD drop in equities has been contained (MSCI Europe NR -5.3%, MSCI USA NR -5.3%) and this may seem surprising in a context where inflation is reaching high levels (+5.9% in the Eurozone, +7.9% in the US), and where a violent military conflict is taking place at the doorstep of Europe. However, a fundamental reading of the context justifies the robustness of the equity indices, which have proved to be much more resilient than the bond indices YTD. Global GDP growth should be around +3% according to economists’ forecasts, vs. +4% at the beginning of the year. At the same time, 2022 earnings expectations have been steadily revised upwards. In the US, the S&P 500 2022 EPS has been raised by +1.6% YTD, including +1.0% in March. In Europe, the expected 2022 EPS for the STOXX Europe 600 has risen by +7.0% YTD and +1.8% in March. This is due to the excessive conservative stance of analysts at the beginning of the year, but also to the significant increase in expectations in some sectors such as energy, mining and industrials. Earnings growth for 2022 stands at +9.5% on both sides of the Atlantic, and the equity risk premium remains attractive, despite the rate hike observed in March (+6.6% in Europe, vs. 5% historical average).
Although the war in Ukraine led to a violent correction in the equity markets in the first week of March, they then rebounded strongly on hopes of progress in the negotiations and a diplomatic way out. After two negative months, the Digital Stars funds ended the month up and outperformed their benchmarks, driven by the basic materials and energy sectors, which are more present in the portfolio. Growth stocks in technology (especially semiconductors), healthcare and industrials also rebounded, recovering some of the excesses of the market downturn, even as bond yields rose. The monthly performance of Digital Stars Europe Acc is +2%, compared to +0.8% for the MSCI Europe NR. Digital Stars Europe Ex-UK Acc ended March at +2.7% compared to +0.8% for the MSCI Europe ex UK NR.
Digital Stars Eurozone Acc achieved +1.7% against -0.7% for the MSCI EMU NR. This fund, which applies a reinforced ESG policy, obtained the French SRI label in March.
The rebalancing carried out in March were again influenced by the conflict in Ukraine. The model has therefore mainly included basic materials and energy stocks and to a lesser extent defensive stocks (food and telecoms). We are selling healthcare stocks, as COVID is no longer a major concern for investors, as well as some financials exposed to the Ukrainian crisis.
Digital Stars Europe remains overweight in Industrials, Basic Materials, Technology and Financials. The overweight in Basic Materials increases to 6%. The fund is underweight in Food and Utilities. The UK remains the largest weighting at 15.5%, but has been reduced; ahead of Germany at 14.8% and Sweden, up to 11.7%.
Digital Stars Europe Smaller Companies Acc ended up at +3.9% in March, significantly outperforming the MSCI Europe Small Cap NR at +0.7%. Most of the stocks in the portfolio performed well, in particular thanks to earnings publications. Unsurprisingly, energy, which is well represented in the fund, was the leading sector over the month. Technology stocks also performed remarkably well.
The latest monthly portfolio reviews have strengthened energy, as well as materials and utilities. IT and industry stocks were significantly reduced, as well as healthcare and finance.
The portfolio is significantly overweight in technology and energy, and underweight in industrials, real estate and media. The United Kingdom (biggest underweight) is the largest weight with 18.7%, ahead of Norway with 13.3% which became the biggest country bet following the energy push.
Digital Stars US Equities Acc USD ended March down -2.1%, significantly underperforming the MSCI USA NR at +3.5%, and the MSCI USA Small Cap NR at +1.2%. The performance of the US market was driven by the energy and utilities sectors, both absent of the fund. And our worst sector contributions are mainly among our largest overweights, such as specialty retailing, or construction/homebuilding, or banks.
The latest monthly portfolio review strengthened consumer discretionary, materials and media, and reduced industrials and financials.
The portfolio is still overweight in banks, consumer discretionary and industrials, and underweight in technology (software), media and pharmaceuticals. Energy companies remain under-represented due to the widespread use among them of unconventional extraction techniques, which is prohibited as a result of the Socially Responsible Investing criteria of the fund.
Investment Monthly Report
February 2022
10 March 2022
The beginning of 2022 will long remain engraved in our memories. It is indeed rare that such a succession of events can be observed during such a short period. While January saw yields rise sharply in anticipation of monetary normalisation, causing the second most powerful style rotation (in favour of value) observed since 2003, the Russian invasion of Ukraine suddenly reshuffled the deck. Against this backdrop, equity indices fell (MSCI Europe NR -3.0%, MSCI USA NR -3.0%) and the rotation in favour of cyclical sectors was interrupted. Even if it is risky to anticipate the evolution of the conflict at this stage, it is important to take stock of the fundamental situation of the indices in the event that an exit door is found. The risk premium on European equities stands at 6.9%, a very generous level compared to the 20-year historical average of 5.0%. Furthermore, central banks are now obliged to postpone monetary normalisation and the 0.50% easing in the German 2-year yield shows that investors are not mistaken. Finally, important decennial technical supports such as the 2000 and 2007 highs in Europe are now very close, which in theory argues for a strengthening of the asset class at these levels in a medium/long term perspective.
In this difficult environment, Digital Stars funds ended February 2022 down. As bond yields continued to rise at the beginning of the month, growth stocks suffered again. The Russian invasion of Ukraine had a negative impact on the financial and industrial sectors, while the energy and commodities sectors surged. Interest rates then fell sharply at the end of the month.
The monthly performance of Digital Stars Europe Acc is -5.2%, compared to -3% for the MSCI Europe NR. The relative drawdown of the fund is similar to what it experienced in 2014 and 2018. More generally, in the 23-year history of Digital Stars Europe, each rolling 5-year period has seen such a short term relative drawdown. The fund has then adjusted and closed the gap, strictly following the quantitative model. Digital Stars Europe Ex-UK Acc ended February at -5.4% compared to -4.1% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved -6.5% against -5.2% for the MSCI EMU NR.
The rebalancing carried out in in February was heavily influenced by the sector rotation in January and the crisis in Ukraine. The strongest momentums were the stocks that passed these two periods favourably. The model has therefore mainly included basic materials stocks and to a lesser extent utilities and defensive stocks (food, telecoms). We continue to exit growth stocks and have stopped the integration of financials, which were badly impacted by the Ukrainian crisis.
Digital Stars Europe remains overweight in Industrials, Technology and Financials and is now overweight in Basic Materials, where exposure is up 3.2%. The fund is underweight in Food and Utilities. The UK remains the largest weighting at 18.7%, ahead of Germany at 13.4% and Italy at 12.2%.
Digital Stars Europe Smaller Companies Acc ended down at -3.5% in February, slightly outperforming the MSCI Europe Small Cap NR at -3.9%. Unsurprisingly, energy, which is well represented in the fund, posted the best performance over the month.
The latest monthly portfolio review has strengthened banks, as well as materials and food. Healthcare and industry were significantly reduced (especially in Sweden), as well as media, leisure and IT.
The portfolio is significantly overweight in technology and underweight in real estate and media. The United Kingdom (biggest underweight) is the largest weight with 19.2%, ahead of Italy (very underweighted) with 13.2%.
Digital Stars US Equities Acc USD ended February down -1.1%, significantly outperforming the MSCI USA NR at -3.0%, but lagging the MSCI USA Small Cap NR at -1.0%. The biggest contributors were among healthcare and industrial stocks. But it was technology that increased the positive difference with the market, notably through semiconductors and software.
The latest monthly portfolio review significantly strengthened banking, and reduced retail distribution.
The portfolio is now mainly overweight in banking, industrials (transport) and consumer discretionary, and underweight in technology, media and healthcare. Energy companies remain under-represented due to the widespread use among them of unconventional extraction, which is prohibited as a result of the Socially Responsible Investing criteria of the fund.
Macro update – February 2022
5 February 2022
Podcast – Aymar de Léotoing with Argentum Asset Management
4 February 2022
– Market forecast – what do we expect to see in the markets this year?
– How does Chahine Capital respond to crises like a new coronavirus?
– What should our investor think of as a momentum strategy?
– What is special about your model in terms of market adjustment/flexibility?
– U.S. fund strategy – what sector weightings does Chahine Capital think are promising this year?
– Which sectors are the biggest key drivers in the Digital Funds Stars US Equities?
Discover the podcast of Aymar de Léotoing, portfolio manager.
Investment Monthly Report
January 2022
31 January 2022
Equity indices are entering 2022 with a first month of decline and a resurgence of volatility (MSCI Europe NR -3.2%, MSCI USA NR -5.7%). This is in stark contrast to 2021. In the United States, we have to go back to the “Covid crash” of March 2020 to find any trace of such a monthly underperformance of the equity indices. At the same time, significant sector and style performance differentials were observed on both sides of the Atlantic, extending the rotation in favour of Value that began last September. In Europe, the monthly performance spread between the “Visibility/Quality” style and the “Value” style is 14.5%. Since 2003, only the month of November 2020, when the vaccines were discovered, had revealed such a discrepancy according to our proprietary style indices. This rotation is justified by the awareness of the non-transitory nature of inflation and the now less accommodative stance of the Fed, and to a lesser extent the ECB. It also rectifies, albeit only partially, a fundamental configuration in which valuation differences between the various market segments appear excessive in the light of historical observations.
After an exceptional year in 2021 when returns exceeded 30%, Digital funds ended January 2022 with a significant decline. The violent sector rotation had a negative impact on momentum stocks, particularly on technology, med-tech and healthcare equipment companies. High PE and high growth companies in the portfolio suffered from rising interest rates amidst fears of overvaluation, and this was not sufficiently offset by our cyclical stocks. Of course, this is not the first time we have experienced such a downturn due to mean reversion and the fund has historically proven its ability to adapt and recover. As rates stabilised at the end of the month and the earnings announcement period began, we saw some normalisation of the markets. The funds were able to recover a small part of their underperformance during the last week. The monthly performance of Digital Stars Europe Acc is -10.2%, compared to -3.2% for the MSCI Europe NR. Digital Stars Europe Ex-UK Acc ended January at -9.5% compared to -4.8% for the MSCI Europe ex UK NR. Digital Stars Eurozone Acc achieved -8% against -3.5% for the MSCI EMU NR.
While it is difficult to say whether the “value” trend will continue, the impact on momentum signals was strong enough to have an immediate influence on the last rebalancing made in January. The model has almost exclusively included value stocks, mainly financials, and has reduced exposure to the technology and healthcare sectors.
Digital Stars Europe remains overweight in Industrials and Technology (despite lower exposure), and becomes overweight in Financials, where exposure is up 4%. The fund is underweight in Food and Utilities. The UK remains the largest weighting at 19.5%, followed by Italy at 12.7% and Germany at 11.5%.
Digital Stars Europe Smaller Companies Acc ended down at -12.1% in January, underperforming the MSCI Europe Small Cap NR at -6.8%. The ongoing style rotation particularly affected technology and healthcare stocks. The winning sectors of the month were energy, banking and insurance.
The latest monthly portfolio review has significantly strengthened banks, as well as utilities and food, and significantly reduced healthcare and technology.
The portfolio is significantly overweight in technology and underweight in materials and real estate. Sweden’s weight is reduced to 17.2%, just behind the UK (18.7%), which is still very underweight.
Digital Stars US Equities Acc USD ended January down -13.4%, significantly underperforming the MSCI USA NR at -5.7% and the MSCI USA Small Cap NR at -8.0%. The violent style shift that began at the end of 2021 continued, but in a falling market, to the detriment of cyclical and growth stocks. In particular, our retail/apparel stocks, semiconductors and lending platforms suffered the most from the downturn.
The latest monthly portfolio review significantly strengthened banking, and reduced retail distribution.
The portfolio is now mainly overweight in banking, industrials (transport) and consumer discretionary, and underweight in technology, media and healthcare.
Macro update – January 2022
5 January 2022