NCM Insights - Craig Millar - NCM Global Funds
January 08, 2020
1) What investment themes had the most positive impact in the global funds in 2019?
From a performance standpoint, this last year was one of the better years in my career. High quality is the theme for our global mandates and it got white hot in 2019.
When everything you own is not doing well and nobody wants to own it, there is continual selling pressure. We have the opposite in that what we own, everybody else wants to own. We have an emphasis on high quality companies, larger company exposure, return on equity (ROE), rather then just buying cheap valuations which hasn’t worked for a long time and I do not think it will for a long time to come.
2) Do you expect those themes to continue? Why or why not?
Investors are constantly worried about a recession or a correction in the market and money will continue to flow to high-quality investments as these investments have a level of safety and security.
So the themes we invest in are safe, stable and secure companies and as long as we are in this type of environment our style of investing is always going to be in demand.
3) Can you tell us about any year end adjustments you made to the funds?
Nothing major, we are happy with what we own and are happy with what we do not own.
4) Which stocks performed the best in 2019 in the funds? Which stock(s) did not meet expectations?
There was not a lot that didn’t work last year. The portfolios overall did very well. On an individual stock basis, DSV returned over 80% in 2019. Estee Lauder, Microsoft, Lockheed Martin and JP Morgan also did very well.
5) Can you talk about the fixed income portion of NCM Global Income Growth Class and what affect it had on the fund in 2019?
The fixed income component had a good return in 2019 better then the benchmark. We added to the fixed income component at the end of the year. As the stock market went up we needed to bulk up a little bit on fixed income as the weighting went down with the positive equity movements of the portfolio.
6) How did the geographical allocation change over the course of 2019 and do you expect to make any changes in 2020?
In 2019 the U.S. weighting went up and the European and Japan weighting went down. Asia ex. Japan was unchanged. In 2020, I would expect more of the same.
7) Any advice for an advisor that says we can’t make a good return as earnings growth is expected to be 5% to 6% in 2020?
You do not need significant earnings growth to make money in the stock market. For example, total earnings growth for the 1980’s for the S&P 500 was 5% and for the 1990’s was 7%. Yet the S&P 500 went up about 17% per year for that 20 year period.
8) If you were sitting across an advisor looking for direction on where to invest in 2020, what are three major points you would emphasize?
Lots of people were very worried in 2019 especially in the back half of the year. I read a lot of articles that there was a correction coming and I wrote every week to help everybody that I didn’t see a correction or recession coming. I think you want to continue to align yourself with high quality, high return, asset light, growth oriented businesses and that’s what we own in our portfolios.
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