CIRCA5000 | April - June Performance Update

April - June Performance Update

By CIRCA5000 TeamBack to Mission Control

Investment updates • 4 min read

April-June Performance Update

investment performance to 30th June 2022

Global benchmarks

Key points

1. April to June were bad months for the stock markets, but funds on offer with CIRCA5000 fell relatively less. Pharma Breakthrough and Global Clean Energy funds were less impacted, while Cybersecurity & Data Privacy, as well as Digital Learning & EdTech, were hard hit. 

2. High inflation, slowing growth and rising interest rates all resulted in falling stock markets. But as the easing of lockdowns in China, rising oil supplies and higher interest rates start to make an impact, inflation could cool off quite a bit over time. 

3. Signs of falling prices are already visible, giving hope of better stock market performance moving forward.  

What happened in the last 3 months?

Stock markets dropped between April and June as inflation stayed scorching hot and growth slowed down. Many of the funds offered for investment by CIRCA5000, however, fell less than the overall markets. 

Defensive funds better off

Pharma Breakthrough and Global Clean Energy are two such instances. Pharmaceuticals are considered ‘defensive’ stocks. These refer to companies whose fortunes do not rise and fall with the economy, as say, entertainment stocks. When people cut back on spending during difficult times, like now, they are more likely to forego cinemas and dining out than medicines. 

Global Clean Energy also has a defensive quality. We need energy for our day-to-day living even when its prices rise. With bans on Russian energy, alternative sources are being considered for energy independence. Clean energy’s falling costs make it a competitive contender for future energy supply.

Tech-related funds suffer

On the other hand, the Cybersecurity & Data Privacy and Digital Learning & EdTech funds suffered quite a bit, as technology investments lost favour with investors. Big tech companies like Apple and Google owner, Alphabet, have seen a 25% drop in share price in the first six months of the year. 

Why are stock markets falling?

A big reason for the sharp drop in stock markets is the cost of living crisis, caused by high inflation. This is bad for stock investments because companies’ costs are rising and customers are spending less. So they don’t have the option to pass on cost increases to consumers, which can result in lower profits. 

Interest rates are being increased to control inflation too. This means more expensive loans, which could otherwise be used for building more manufacturing facilities to buy more gadgets and everything in between. If borrowings slow down, so will growth. Since stock markets are sensitive to companies’ growth, they get impacted too.

What happens next?

We expect markets are likely to stay volatile at best in the near future but are hopeful of the future. This is because inflation could ease quite a bit.

Why can price rise slow down?

1. Effect of interest rate rises will be visible over time.  

2. Lockdowns in China are easing. Considering that the country is the biggest exporter of goods in the world, extended lockdowns there till recently, impacted production and delivery of a range of items, resulting in increasing prices. 

3. Oil prices could relax too over time as supplies are being increased. This could help our energy bills. 

4. Metal prices, which are a key input for making everyday use items, have already fallen dramatically this year. 

What could go wrong?

While we are hopeful that things will look better in a year’s time. We should also always know what could go wrong. As the cost of living crunch continues to impact people, we could see more policy action like tax increases as well as social unrest, which could keep investors nervous. 

Our takeaway

For anyone with a big expense on the horizon it may make sense to hold onto some cash. But we also believe in investing for the long-term, and such situations can actually be opportunities for investors who are willing to buy now and stay put

Companies in Focus

With its focus on positively impacting water management, Bentley Systems’ contribution could soon be visible on the River Thames. Its software solutions have played a part in designing a super-sewer project, currently underway to help in cleaning up the river. 

All while showing healthy financials. In Q1, 2022 its revenues grew by 24% from Q1 last year. Much of these were from subscribers to its solutions, which are typically more predictable and stable revenues, compared to one-off purchases. This is a big positive during a slowdown in the economy, like right now. It is also profit-making.

The wind energy-focused Danish company posted impressive Q1 results, with a 78% increase in revenues and a huge 257% rise in net profits from Q1, 2021. It’s expanding its onshore wind operations further, having revealed recently that it is in late-stage negotiations to acquire the French-German platform, Ostwind. 

Besides being big on green energy, Ørsted is also trying to restore marine biodiversity in Kattegat, a strait between Denmark and Sweden, with 3D printed reefs. Read more about its impact beyond energy in our post here.

Vertex Pharmaceuticals is a stellar example of how impact investing can drive not just positive change but also give super returns. The stock, which is the third largest holding in CIRCA5000’s Pharma Breakthrough fund, is up almost 29% this year. 

This has been driven by its first Q1 results, which showed a 22% growth in product revenue from Q1, 2021.  It also showed a 17% rise in net profits. The rise was driven by its successful cystic fibrosis treatment, TRIKAFTA, which has positively impacted the lives of over 50% of the patients across Australia, Canada, Europe and the US. Read our Impact post on its diabetes treatment here.

Notes: 

1. Q1 refers to the first three months of the year (January-March).

2. In the 'Companies in Focus' section, figures next to company titles refer to the revenue increase in Q1, 2022 over the same quarter of the year before.

Back To Mission Control

Invest in ahuman future

Desert Landscape