We have been busy reorganising the holdings in our fund over the last few months focusing on selling overvalued shares and buying undervalued ones. Why is this?
Well one reason is our shift to a totally value investing approach. It is difficult to find companies that are undervalued, especially in the 7 themes of our fund, but they do exist and can be discovered with a lot of in depth research and analysis.
Value investing is patient investing. You buy shares in companies that are off the radar of analysts or have simply fallen out of favour for whatever reason. If the shares are cheap, the company isn’t manipulating its earnings and it has a sustainable competitive advantage, hey presto you have a potential winner.
The downside of value investing is that your fund may lag its benchmark index for up to 3 years before the market finally realises how undervalued the companies are and their values then tend to rise, in some cases substantially.
At the time of writing our fund has increased in value this year to date but lags the Global Index currently. On the face of it the CCM Intelligent Wealth Fund appears to be struggling but nothing could be further from the truth.
We have invested in a number of fantastic companies that meet our strict selection criteria but the market hasn’t recognised their true value yet. Furthermore the benchmark our fund is measured against, the Global Index, doesn’t truly reflect the type of shares our fund invests in. The Global Index, otherwise known as the MSCI World Index, consists of 4,500 of the largest companies in the world so it is dominated by large US companies.
The problem is that the US stock market by every measure is very overvalued whereas our fund is significantly undervalued. We do not believe that the Global Index is the most appropriate benchmark for our fund but there is nothing we can do about it as our ACD, Carvetian, chose this benchmark by following the FCA’s strict guidelines. That’s just the way it is.
I am confident that our fund will perform extremely well in comparison to the Global Index over the next 18 months during which time I expect our relative position to reverse. In other words our fund’s performance is highly likely to exceed the global index over that period of time.
Why am I so confident? It is because our investment approach has been adopted from Warren Buffet, no less, who is the most successful investor in history.
In addition to value investing we also invest a small proportion of the fund into early stage companies via funds such as investment trusts and ETFs. We also invest a small proportion of the fund into private equity but only after very careful analysis and in the knowledge that such companies are planning to float on a leading stock exchange within 12-18 months.
So there is no doubt that we have a number of hidden gems in the CCM Intelligent Wealth Fund. Only time will tell but we fully expect robust performance from the fund over the next 18 months.
So what are you waiting for? If you are not already invested in our fund why not do so today? Contact us for more details. You know it makes sense.
