The KEN European Growth Champions Fund achieved a positive performance of 0.91% in September (+1.49% gross). The average net exposure was 100.72%. The long positions contributed +2.17% (gross), while the short positions cost -0.68% (gross).
Market Review:
- Indices: DAX +2.2%, MDAX +4.5%, SMI -2.0%, TecDAX +0.4%, SDAX +0.7%, Russell 2000 +0.6%
- Currencies: Euro vs. CHF +0.3% (CHF 0.94), Euro vs. USD +0.81% (USD 1.11), Bitcoin +7.08% (USD 63,314.81)
- Commodities: Brent Oil -6.55% (USD 71.95), WTI -7.03% (USD 68.15)
- What moved the markets? Investors remain focused on central bank interest rate decisions. On September 18, the ECB, as expected, cut the key interest rate by 0.25% to 3.5%. China announced a comprehensive stimulus package, which, among other things, encourages stock buybacks and supports the mortgage market through lower interest rates.
Portfolio Review:
The interest rate cycle caused a sector rotation, and growth stocks like Delivery Hero, Zalando, HelloFresh, and AboutYou contributed strongly to the performance with solid momentum. Naturally, this environment also benefited real estate stocks like Vonovia and LEG, which we continue to hold. Zalando is trading at an EV/Sales multiple of 0.64x 2024, and we are observing positive earnings revisions, which should further boost the stock.
We also bought a small position in BOSS: After trading at EUR 33.70 in September or under 5x EV/EBITDA, and as some analysts parted ways with the former market favorite, we see an opportunity for a recovery. The management’s growth ambitions may be too ambitious and could be the reason for the sharp sell-off. Nevertheless, we find the current level attractive, and the risk-reward ratio looks interesting again.
Investment Decisions:
We reduced the short book in September to take advantage of the market momentum. On the long side, we added stocks that have rebound potential but took profits on larger holdings, too. The net exposure is around 100%, still reflecting our positive outlook on the market.
Outlook:
We expect the ECB to make a third rate cut by 0.25% to 3.25% in December. Tensions around Israel could affect oil prices and the economy, at least in the short term. We expect higher volatility as a result, but the rate-cutting cycle should not be underestimated. It has just begun and without a global recession underway. So far, we expect robust global economic growth and weakening inflation. Therefore, positioning in stocks in Europe and the USA remains interesting. China’s stimulus package has provided a boost to its struggling stock market and housing market, and it could also lead to a broader recovery of the Chinese economy. Overall, we see more positive factors at play and remain optimistic for small and midcaps in Europe.
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