During March, shares globally continued their upward path. Year-to-date global equities have now gained more than what one would normally expect in an average year. The Fund lagged the strong equity market, which is not uncommon for a more defensive value oriented strategy.

The market was still in a positive mood because of the same reasons mentioned during previous months. In particular the announcement by the Fed (about a slower path of potential interest rate hikes) still helped the market. Bond yields even fell further in March that pushed shares further up.

Like in February, also this month information technology was the strongest sector. Year-to-date, it is also by far the best performing sector and the major reason the Fund lagged the market (see below). Also consumer staples performed well, while the only sector showing a negative performance were financials (as banks were weak in March).

As mentioned, the Fund lagged the strong market, as both sector allocation and stock selection detracted from the performance. In particular selection within the sectors consumer discretionary, industrials and communication services was negative this month. Sector allocation was negative as we were underweight the best performing sectors information technology and consumer staples. Both sectors are quite expensive and do not offer a lot of attractively high dividend yielding stocks. We are overweight financials that was the weakest sector. In addition, the US market performed better than the European market, and the Fund is overweight Europe and underweight the US (all a result of our bottom up process with strong focus on attractive valuations). Stock selection within materials was strong as Fortescue Metals rose sharply as it benefited from the continued strong iron ore price.

In March we implemented the quarterly rebalance. We sold five positions completely, while we added four new names to the portfolio. Boskalis was sold after it lowered its dividend (although they also introduced a share buy-back). However, the 2019 outlook was disappointing. Also, Bezeq announced a dividend cut, related to Israelian legislation that subscribes companies to cut the dividend when they made a loss over the last eight quarters, also when this is related to non-cash impairments. Centrica was sold after it disappointed again with falling customer numbers and an increased risk for future dividends. Nordea Bank was sold as we saw better alternatives in some new investment ideas. Green King was sold after the strong share price performance. We added US oil-services company Schlumberger, a market leader in many areas with an attractive valuation. Also Keycorp was added, a well-managed US bank. Seaspan Corp also entered the portfolio, it operates a fleet of containerships and is attractively valued. Lastly, we added Venture Corp, the Singapore based company manufacturers and designs electronic products for many well-known companies ranging from healthcare to the consumer goods sector.

We believe overall global stock market valuations are elevated, although Emerging and European markets still offer some pockets of attractively valued opportunities. The North American market is quite expensive. A company may appear attractive based on its price to earnings ratio or other headline multiples, but if margins and/or revenues are high, this only gives you limited information about the future returns of an investment. In our investment process we spent a large portion of our time understanding where profitability should be on an over the cycle basis, as this is what determines the cash flows we will receive as a long term shareholder.

Our focus is on finding companies with sustainable dividends that can be bought at a discount to our estimate of intrinsic value. We base our estimate on the Earnings Power Value (EPV) framework of the Columbia Business School. EPV allows us to separate the three valuation components: asset value, earnings power and growth value. This framework improves our ability to analyze what we are paying for, and gives insight into whether a stock is priced with a margin of safety. In addition, ESG (Environmental, Social and Governance) is fully incorporated in our investment process.
The Fund now has a forward yield of around 5.2%.