HLMEX Commentary – Q3 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 third quarter of 2020, HLMEX underperformed the benchmark (MSCI Emerging Markets Index) by 39bps largely due to poor allocation to growth-oriented names. An underweight to Consumer Discretionary and overweight to Financials – specifically India – largely detracted from returns. Weak stock selection in Consumer Discretionary also hurt performance. Regionally, overweight allocations to Europe and Latin America, and an underweight to North Asia detracted from performance. On the other hand, the fund saw strong performance in Industrials and Communication Services. Stock selection in China and Taiwan was also strong.
Q3 2020 Summary
- HLMEX returned 9.17%, while the MSCI Emerging Markets Index returned 9.56%
- Contributors
- TSMC (Taiwan), WEG (Brazil), YNDX (Russia), Fuyao Glass (China)
- Detractors
- ASII (Indonesia), LKOH (Russia), FEMSA (Mexico)
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
- Over past year, portfolio has shifted from being overweight in expensive stocks to underweighting this area – has created a headwind for 2020
- Expensive, COVID “immune” stocks have continued to outperform
- 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