2016 has been a year of major events. The outcome of the British referendum to leave the EU and the nomination of Donald Trump as the Republican presidential candidate are the two largest political surprises. Following Brexit, the global equity markets responded immediately, sending the share prices of a number of SKAGEN's portfolio companies into a short-lived tailspin. The portfolio managers of SKAGEN Global took advantage of the drop in share prices to add to a number of the companies that they had most faith in.
Ready to take advantage of mispricing
As portfolio manager in SKAGEN Global Søren Milo Christensen explains in a quarterly video update on the fund page:
"When you talk about the US election, there is no doubt that from a financial market perspective, with Hillary, you know what you're going to get, whereas Trump is seen as more of a wild card. No doubt if we have a Trump victory, that will create uncertainty; the market doesn't like uncertainty and that will create volatility – most likely on the downside."
"In terms of how we position ourselves, we don't position ourselves to gain from an event where we don't have an edge in analysing the outcome. What we do try to do is to construct a portfolio where we are not overly exposed to a certain event happening. But then of course if we have a Trump victory, we know that the market has a tendency to overreact, and then of course we will be ready to take advantage of any mispricing, just as we saw after the Brexit vote."
Export to the US
The portfolio managers of the emerging markets fund, SKAGEN Kon-Tiki, have also considered the robustness of their portfolio ahead of the US election.
"The biggest risk is for companies that export into the US market, which has competitors in the US producing in the US. That is very limited. Our biggest position Hyundai produces 70 percent of its vehicles which are sold on the US market, in the US. For Samsung, they don't have any competitors producing in the US market. They produce memory chips in the US market, and that is for export to Asia to go into consumer goods. There are some companies in our portfolio that are partly exposed, but it's very limited. ABB is one example. They have 23,000 people working in the US alone, so you could say that it's partly a US company as well," says portfolio manager in SKAGEN Kon-Tiki, Knut Harald Nilsson in his quarterly video update on the fund's page.