THE INVESTOR CENTRE
THE INVESTOR
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39
E
quity markets started the fourth quarter
strongly in response to the words and
actions of central banking with the European
Central Bank hinting at additional stimulus,
China unexpectedly cutting its lending rate
and the Federal Reserve warning of a rate
hike in December.
As the quarter wore on, however, it
became apparent that central bank policy
was having a limited e ect on corporate
fundamentals, which are now clearly
deteriorating, as demonstrated by a string of
pro t warnings in the past fewmonths from
companies such as Rolls-Royce, Pearson and
Sports Direct. Commodity prices continued
to fall dramatically, putting pressure on the
earnings and dividends of quoted mining
companies such asAngloAmerican.
We remain concerned that the global
economy is slowing quite sharply at a time
when central bank actions have pushed
valuations to high levels.Although we cannot
know whether another recession is around
the corner, the economic data has been
uniformly poor over recent months.This
would not, in itself, create an issue if it was
adequately factored into valuations. However,
today we can con dently assert that, for many
companies, this is absolutely not the case.
Accordingly, we think it is correct to take a
defensive stance and have some cash on hand
to take advantage of better opportunities that
may come along.
RWC
Equity Income
Defensive stance is prudent with cash
to take advantage of opportunities
Global economy
appears to be
slowing sharply
Nick Purves
A
fter a strong performance in October,
equity markets gave up some of these
gains over the remainder of the quarter,
impacting returns in the fund.Weak
sentiment towards commodities further
adversely a ected our holdings in miners
such asAngloAmerican and South32, while
some of the portfolio’s retail investments
su ered as a result of uncertainty over
Christmas trading.
Meanwhile, life insurerAviva performed
well following its acquisition of Friends
Life earlier in the year.Within the core UK
equity portfolio, we take steps to minimise
the e ects of market downturns by ensuring
all of our investments o er us a‘margin
of safety’.This means only investing in
companies on low valuations and with the
balance sheet strength that o ers them the
best chance of making it through tough times.
It is also why we hold a stock for, on average,
ve years.
Even after big market falls, such as the
nancial crisis following the dotcom bubble,
markets have tended to bounce back quickly.
But to bene t from the bounce, investors
must be able to believe in their process
enough to sit tight through the market
panic.We believe that through a disciplined
adherence to a value approach – irrespective
of the prevailing market environment – we
can bene t from the signi cant rewards that
a value investment style is proven to generate
over the long term.
T
he power of data analytics – the detection
and communication of meaningful
patterns in data – has always been a key
focus of information technology innovation.
However, we believe we are seeing a revival
of the analytics space as the ongoing march of
Moore’s Law fuels the continued availability
of faster, cheaper computing and storage.To
put it in perspective, today’s smartphones
are more powerful than the computers the
Apollo program used to put a man on the
moon in 1969.
This exponential improvement in
computing has enabled the creation of new
businesses with powerful data analytics
capabilities. One such company is Medidata
Solutions, a leading provider of integrated
software-as-a-service solutions for global
drug development.As part of its suite of
services, the company is developing data-
driven tools designed to unlock value from
its large database of nancial, operational and
clinical information.We believe this could
help Medidata’s customers make their drug
trials faster, more e cient and less expensive.
Given increasing evidence of a compelling
customer return on investment, we think
Medidata can continue to capture share of the
clinical development software market, which
we project will grow in the high single digits,
or faster, over the next ve years.
SCHRODERS
Managed Growth
Schroder Managed
Aviva performed strongly following
acquisition of Friends Life
SANDS CAPITAL
Satellite manager: Global Equity
Medidata Solutions offers good value
as it grows over the next five years
Results a ectedby
commodities dip and
retail uncertainty
Revival of data
analytics in IT sector
o ers opportunities
David Levanson, Sunil Thakor and
Perry Williams
Kevin Murphy and Nick Kirrage
