J STERN & CO WORLD STARS GLOBAL EQUITY: The fund that goes looking for all-star shares with pricing power
Investment fund J Stern & Co World Stars Global Equity has just enjoyed its third anniversary – and so far it’s a job well done.
The fund, managed out of London, has delivered respectable three-year returns of 44 per cent. ‘It’s been a good start,’ says manager Christopher Rossbach. ‘I’m pleased with the results we’ve achieved.’
As its name implies, the fund invests in some of the world’s leading stock market-listed companies, primarily based in the United States. ‘We’re looking for companies that have an enduring competitive position in the markets they operate in,’ says Rossbach. ‘Crucially, they must have pricing power so that they can increase their prices to offset inflation.’
The result is a portfolio built around companies leading the way in key areas such as digitalisation, healthcare, consumer goods and infrastructure. It comprises 29 stocks with the biggest position being in US tech giant Alphabet. The only UK holding is drinks giant Diageo.
Rossbach’s modus operandi is based around holding companies for the long term – between five and ten years. ‘We like to run with our winners,’ he adds. It explains why portfolio changes are few and far between.
So, last year, the only new company brought into the fund was US software company Salesforce – no holdings were sold. This year, the only portfolio activity has been the building of a position in US technology company Nvidia, now a top five holding.
Stakes in companies such as Alphabet, Amazon, Nestle and Swiss healthcare company Roche have been held since the fund was launched – indeed, since J Stern & Co started running bespoke ‘world stars’ portfolios for some of its rich clients ten years ago.
Newer fund additions, made during the market tumult of 2020, include Swiss eye care specialist Alcon and building supplies company Sika, also headquartered in Switzerland. ‘Alcon should do well from the huge pent-up demand for eye surgery as a result of operations being postponed during the pandemic,’ says Rossbach. ‘Sika makes products vital in ensuring the waterproofing of homes.’
Rossbach is an optimist, believing the global economy will continue to expand, despite rising geopolitical tensions and disruptive supply chain issues. He also says globalisation will remain a potent investment force, although there will be a ‘realignment’.
This, he believes, will result in less reliance on China as a supplier of goods – and western economies turning to the US and the Middle East for supplies of oil, gas and commodities.
‘This realignment will not derail global growth,’ he insists. ‘Yes, there are challenges and headwinds, but the backdrop is good. My message to investors is to avoid all the short-term market noise and volatility – and keep a long-term perspective. The kind of quality companies that we invest in will survive and thrive.’
He points to recent first quarter results for luxury goods giant LVMH as evidence of this. Revenues were up 29 per cent year on year. ‘They were punchy results,’ says Rossbach. ‘Demand for luxury goods is still strong.’
Investing in a tight portfolio of leading global companies is not unique to J Stern. Both investment houses Fundsmith and Blue Whale run similar funds – Fundsmith Equity and Blue Whale Growth.
There is not much to choose between the three funds in terms of performance over the past one and three years. The fund is not for income seekers and it can only be bought via select investment platforms such as AJ Bell’s Youinvest. Annual charges are a tad over 1 per cent.