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FFM Fund Newsletter - Oct 2022

October 2021

Dear Investors, Dear Friends,


The month of October offered a respite after two very difficult months. Indeed, the S&P 500 was up +7.99%, the Nasdaq 100 was up +3.96% while, in Europe, the Euro Stoxx 50 was up +9.34% and the CAC 40 was up +8.75%. Interestingly, this came on the back of yet another disappointing CPI print in the US for the month of September (which came out in early October).

For thirty minutes, the markets tanked (by about -3%) and then, for no particular reason, the rebound started and the markets never looked back. They say you never hear the bell ring at market tops and bottoms and this was never truer than this time. It seems that most bad news had been more or less priced in and that, after a while, another set of bad news just has less and less impact, as most market actors are by now aware of the situation.

More anecdotal but no less telling is the example of Whirlpool, the US home appliances maker. Whirlpool can be seen as a sort of derivative, leveraged play on the US housing market. Said US housing market is currently in dire straits given that 30-Year mortgage rates (the most common type of mortgage in the US) is hovering above 7% and one could have assumed Whirlpool’s Q3 earnings would be a bloodbath. And it was, with earnings coming in below 16% of expectations and guidance terribly negative. The stock duly opened -5% lower only to make its way back during the session and up by about +10% since these lows. As we wrote previously, maybe a lot of bad news are, by now, priced in.

This doesn’t mean we are out of the woods just yet. The consolidation period we have talked about in the past months is still in full swing and the market will keep on reacting to the latest headlines, Fed decisions and macro uncertainties. The only certain thing, for now, is that the June lows were severely tested and have held up well. It is interesting to note that, since the markets traded at the same levels back in June, central banks have raised rates relentlessly and bond markets have kept going lower. This should be seen as a very positive sign.

Our Funds

In this context, the FFM American Growth Fund was up for the relevant period (28.09.2022 to 26.10.2022) by +1.85% vs +3% for the S&P 500, -0.77% for the Nasdaq 100 and +7.26% for the Dow Jones Industrials. Year-to-date (30.12.2021 to 26.10.2022), the fund is down -28.14% vs -19.84% for the S&P 500, -30.58% for the Nasdaq 100 and -12.53% for the Dow Jones Industrials. Our important exposure to the technology sector results in a fairly similar performance as the Nasdaq 100.

The FFM European Selection Fund was up for the relevant period (29.09.2022 to 27.10.2022) by +5.31% vs +9.93% for the Euro Stoxx 50, +7.13% for the Stoxx Europe 600 and +9.99% for the CAC 40. Year-to-date (31.12.2021 to 27.10.2022), the fund is down -25.52% vs -16.14% for the Euro Stoxx 50, -15.91% for the Stoxx Europe 600 and -12.71% for the CAC 40.

The FFM Global Quality Portfolio was up +2.77% for the month compared to +6.16% for the MSCI World EUR. Year-to-date, the certificate is down -23.38% vs -9.29% for the MSCI World EUR.

The underperformance is mainly due to our underexposure to the oil sector, to financial stocks, and to cyclical stocks in general. For the month of October, more specifically, it should be noted that markets were mainly influenced by the oil sector. We remain confident, however, in the strategy put in place and in the quality of our stocks, especially in these complicated times where companies need to be resilient, have low debt and able to pass on higher energy prices in their goods and services.

Launch of the FFM Swiss & Nordics Certificate

Aiming at currency diversification, FFM Gestion launched the FFM Swiss & Nordics certificate on October 25, 2022. Most investments will be made in Switzerland (70 to 80%) with some diversification (20 to 30%) on ex-euro zone Nordic countries (Denmark, Sweden, Norway).

These countries present very good opportunities. The excellence of their listed small and medium-sized companies goes well beyond the official economic weight of these countries. The qualitative training system (often based on apprenticeship) as well as the political stability and a clear desire to maintain a significant industrial presence in their territories make these country’s small and medium-sized companies incredibly competitive on the world stage. It should also be noted that this year’s stock market correction offers interesting entry points and competitive valuations.


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