Jupiter European sticking with Novo Nordisk – Jupiter European Opportunities says that, for the financial year to 31 May 2017, its total return on net assets was 30.5%, which compares with 35.7% for the benchmark. The total return on the shares was 30.6%. There is a 6.5p dividend.
The manager says that the underperformance is partly explained by sector weightings – notably the overweight position in Healthcare, a sector which underperformed. The most significant detractor during the period under review was Novo Nordisk. Their US business has suffered significant price pressure as its insulin drugs became commoditised and as the buyers have consolidated and in so doing have become stronger. The decision to retain and indeed increase this holding is based on two beliefs: that the company will be able to demonstrate differentiation in its new class of drugs; and that it will be able to monetise these differentiated products. The news flow has been good and they remain confident in this investment. Other poorly performing stocks included Ingenico. This company combines hardware and services in the payments sector. The hardware activity has been particularly disappointing. It is not yet clear whether this business is in structural decline or whether it has simply suffered a short term cyclical downturn.
Inmarsat was another poor performer. The world leader in maritime satellite services has been impacted by the downturn in international shipping. At the same time the company is investing heavily to gain a position in the inchoate passenger in-flight satellite market. Despite the challenges they believe that Inmarsat has a strong core maritime business and will succeed in the emerging aviation business.
Subsequent to the financial year end, the value of the company’s holding in Provident Financial was significantly affected as a consequence of profit warnings attributed to its recent change in business strategy.
On the positive side, the biggest single contributor to performance was Wirecard, the German listed payment services company. It continues to produce strong earnings growth on the back of its internet expertise and global reach. BioMerieux too performed well. This French company has developed new disruptive technology in its field of in vitro diagnostics for medical and industrial uses. It is successfully translating its innovation into strong profits growth. Carnival, the owner and operator of cruise ships, was another significant positive contributor. As the world leader, Carnival is well placed to exploit the favourable characteristics of this sector. Demand for cruise holidays is growing all over the world; China is a new, rapidly growing market; and improving the holiday experience is stimulating fresh demand. Another important contributor to performance was RELX, the publisher and information provider. It continues to build on its strong technology platform and customers need for better information. They believe that it is a ‘winner’ from more stringent regulatory requirements and from its use of digital technology.
JEO : Jupiter European sticking with Novo Nordisk