BMC Global Select May 2024

The best contribution to the fund during the month came from NVIDIA, publishing a stellar report, with the AI trend being the strongest and more clear-cut. At the other end of the scale was US construction materials company Martin Marietta; its share took a breather after its long rise.

Key market events and trends (what has influenced performance most?)

Apart from inflation slowly seeming to be coming down, with interest rates following in its wake, two of the key trends that many companies are discussing are large AI investments around the world and India's robust development. We see AI being used increasingly in pharmaceutical manufacturing, creating tools for programming and computerization, but also for military applications. The US, for example, has shown that AI can fly its F16 aircraft, and the first combat between a human-controlled military plane and one guided by AI has been tested. Microsoft recently announced plans to build a USD 100bn data center, which we believe could require as much energy to run as half a nuclear power plant. An example like this shows how seriously AI is being taken and how much it can change how the world works. 

India is the other trend on everyone's lips. Today, there are very few companies making greenfield investments in China; instead, they are doing so in India. More factories means more jobs, a more highly educated workforce, and increased tax revenues, which all creates a virtuous circle over time. We view this positively, with around 15% of the fund invested in the semiconductor industry and about 7% in Indian companies.

Portfolio changes

During the month, we sold our holding in Sterling Infrastructure, which had increased by some 400% since our first investment some years back. An elevated valuation for Sterling and the departure of its CFO, coupled with the CEO selling off a large chunk of his shares, led us to instead invest in construction materials company Vulcan Materials. We also switched from Beijer Ref to Trelleborg. Both are well-run companies, but we consider Trelleborg to have a stronger balance sheet and to be working with efficacious share buybacks. We will likely return to Beijer Ref some time in the future, but we are taking a pause for now. We also switched from healthcare company United Health to ServiceNow. The company provides, among other things, products benefiting from AI integration between software.

The fund's positioning—our market expectations

Our aim is to invest in a portfolio of the World's Finest Companies, and we are pleased to say that we have never had a more robust and more balanced portfolio than right now. As a global fund, we can position ourselves for the strongest trends around the globe, be that India, AI, or something else entirely. 2024 holds all the ingredients to be a superb year in the markets.