BMC Global Small Cap Select December 2024

The shares that contributed the most during December were Vitec Software, Fortnox, and Everus Construction. Those with the weakest performance during the month were Siegfried Holding, United States Lime & Minerals, and Enghouse Systems. During the month, we took part in the stock market listing of Apotea, which contributed well to December's returns. Apotea received a warm welcome on the market, its share price shooting up 45% on listing day.

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

The stock markets moved sideways in December, owing to increasing concerns about higher inflation in the US. On January 20, Donald Trump will be sworn in as US president, and the reforms he has promised during his presidency will most likely lead to rising inflation in the country. Trump plans to expel all illegal immigrants, which, in practice, means that cheap labor will leave the country and be replaced by workers who demand higher wages. In addition, Donald Trump wants to reindustrialize the US in earnest and bring manufacturing jobs back to the country. Like many other countries, such as Germany, the US relocated jobs to China, where production costs are lower. Bringing these jobs back to the US means paying higher wages, pushing up production costs. If Trump gets this through, there will be a labor shortage in the US, which will put further upward pressure on wages. To even out the differences in production costs between the US and China, Donald Trump plans to implement tariffs on all imports into the US—not just from China, but from all countries. These tariffs will mean extra tax revenue for the US state apparatus.

Speaking of taxes, Trump also plans to drive an expansionary fiscal policy of cutting taxes on both labor and corporate profits. Cutting taxes when the US is struggling with its largest-ever national debt could be considered quite controversial, but the aim is to stimulate the economy. Another sensational aspect to Trump's coming presidency is his naming of Elon Musk as a new advisor. He will help Trump to streamline the entire US state apparatus to get more out of each tax dollar. Moreover, Donald Trump wants a weaker dollar to make US products more attractive. Right now, the market is betting on a stronger dollar, which has the reverse effect. We are entering a period when the US will have a president with new and different policy ideas and who can do things in another way.  The equity and bond markets are trying to price in (discount) the new fiscal policy, meaning interest rates have risen and the equity market moved sideways during December. For the moment, there is considerable uncertainty, leaving the markets wondering about what policies will be issued by the White House.

Portfolio changes

During December, we made some changes to BMC Global Small Cap Select. We sold French logistics real estate company Argan (Special Situation), Brazilian payment company Pagseguro (Special Situation), and US construction materials company Eagle Materials (Champion). We bought Swedish online pharmacy Apotea (Special Situation), which was listed in December. We also bought the US's United Park & Resorts (Special Situation), which operates the Sea World and Busch Gardens theme parks.

The fund's positioning—our market expectations

We have a solid global small cap portfolio of what we consider the world's finest entrepreneurial companies—our Champions—in industries such as industrials, retail trade, software, real estate, construction materials, and insurance. We also have a thrilling collection of Special Situations, which we invest in at low valuations and aim to sell at higher values. Central banks' rate cuts have now started in earnest, which we anticipate will benefit small cap stock prices during 2025.

We thank you for your faith in us in investing your capital.

*MSCI ACWI Small Cap NTR USD in EUR