David Ross, CFA, and Louis Bersin, CFA, Managers of Echiquier World Equity Growth, La Financière de l’Échiquier (LFDE)
Equity markets continued to soar in 2024. The American economy was much more robust than expected, supported by a fiscal deficit which should be between 6.4 and 7% of GDP over the year. The American stock index, the S&P 500, generated a performance above 20% for the second consecutive year, a first since 1997-1998. On the monetary front, after several years of restrictive policy, the American Federal Reserve decided to relax its policy by lowering its rates. More generally, 18 of the 25 main central banks on the planet made this choice in 2024. This buoyant context allowed Echiquier World Equity Growth to once again generate positive performances during the year. This emblematic fund of LFDE’s conviction management now has assets under management of more than 1.2 billion euros.
OPERATIONS
Conjunctural
After a slight downturn during the summer, large growth-style capitalizations, on which Echiquier World Equity Growth is positioned, resumed their upward trajectory for the rest of the year. In this case, the American stocks Amazon, Nvidia and Visa generated the best contributions to the portfolio’s performance in 2nd half-year, fueled by good quarterly results. Profits were taken on technology stocks and Oracle left the portfolio mid-year. Exposure to financial stocks, mainly to payment networks, was increased in a context of landing, or even resilience, of inflation in the United States. Finally, the fund closed its position in the Mexican bank Banorte, in a move to reduce exposure to Mexico, while President Trump seems determined to impose new customs duties on his neighbors.
-FUNDAMENTALS
The fund initiated a position in Uber, leader in VTC and meal delivery applications. Thanks to its double-digit growth and its efforts to reduce its costs, the company has shown significantly improved profitability over the past 3 years. We believe this will continue with the growing adoption of its services and the use of generative AI to better automate customer service. This investment opportunity presented itself after the election of D. Trump, due to his links with Elon Musk, whose ambition is to launch a robotaxis service. Although Tesla’s progress in autonomous vehicles seems significant, the adoption of this technology should however remain gradual and other players will emerge. Uber relies on more than a dozen partnerships in this area, including several exclusivity agreements in certain cities in the United States with Waymo, a subsidiary of Alphabet.
INVESTMENT STRATEGY
Made up of strong convictions, Echiquier World Equity Growth remains focused on around twenty large international capitalizations. The team is convinced that its best ideas constitute its best long-term investment opportunities. This is the reason why the top 10 weights of the fund represent more than 60%. Companies, selected for their fundamental quality and resilient growth, are exposed to strong long-term megatrends. The fund maintains its cautious view of the economic cycle and mainly relies on secular or defensive growth stocks.
