HLMEX Commentary – Q4 2020
Thesis
HLMEX utilizes fundamental research to find companies with strong quality and growth metrics that can be compared across the global landscape. By focusing on investments with competitive advantages, long-term growth potential, quality management, and corporate strength, HLMEX offers diversity to our EM allocation while generating alpha over the long run. We continue to hold the fund because of the team’s conviction in high quality companies and managed risk through diversification and evaluation.
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Overview
In the fourth quarter of 2020, HLMEX outperformed the benchmark (MSCI Emerging Markets Index) by 352bps largely due to Financial holdings, specifically banks. Overall strong stock selection within the Consumer Staples and Energy sectors also contributed to returns. An overweight to Information Technology also helped returns, yet weak selection with the sector detracted from returns. Stock selection in India, China, and smaller EM regions along with strong selection in Industrials helped contribute to performance for the quarter.
Q4 2020 Summary
- HLMEX returned 23.29%, while the MSCI Emerging Markets Index returned 19.77%
- Contributors
- Samsung Electronics, TSMC, HDFC Corp, Midea Group, Tencent
- Detractors
- Alibaba, CSPC Pharmaceutical Group, CD Projekt, 51Job Inc, Commercial International Bank
Outlook
- We continue to hold this fund and believe in our thesis due to the fund’s focus on quality by emphasizing earnings growth and strong cash flow to gain attractive returns over the long run
- Avoid falling into the momentum trap and sticking with quality names with low turnover (16% in 2020)
- Made three new investments and sold 3 names during the quarter
- Continue to invest in durable growth – quality focus with attractive valuations
[Category Mutual Fund Commentary]
Micah Weinstein
Research Analyst
Direct: 617.226.0032
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109