Market Round-up
In April, US markets rallied as strong earnings overshadowed macroeconomic concerns. Despite the market exuberance, risks have heightened due to energy shocks from the Middle East conflict, and increased uncertainty over monetary policy in light of both higher inflation expectations and a new FED chair.
The final week of the month saw the reporting of results for the first calendar quarter of 2026. The hype around AI shows no signs of slowing, and the hyper-scalers continue to report strong cloud demand and colossal cap-ex investment plans. We are reassured that our portfolio companies have also demonstrated strong underlying operational performance. While the market appears content to overlook these fundamentals in the shorter-term, we see an increasingly attractive valuation opportunity growing. Companies that can compound cash flows can deliver investor returns in many ways, a higher dividend yield, increased buybacks or a share re-rating. The first two are immediately observable across our portfolios, while the last is expected as the weight of earnings growth comes to bear.
Our investment philosophy remains firmly anchored in quality and long-term compounding of returns. Companies with durable competitive advantages, strong balance sheets, and high returns on capital are structurally advantaged and have demonstrated the ability to outperform over a full economic cycle. In moments of cyclical growth, it can be easy to forget the value of their resilience. However, the last few years have demonstrated that investors should treat volatility as the norm, not the exception. In a world of increased macroeconomic and political uncertainty, we believe these companies offer a sound base for investors with a long-term investment horizon.
Investment Views
This month, Hugh and Chris M, portfolio managers of the Evenlode Income fund, touch on their increased allocation to specialist engineering holdings and give a flavour of what they are hearing on the ground after meetings with several of their portfolio holdings including Howden Joinery, RELX, Unilever and Rotork.
Looking further afield, Ben P and Rob Hannaford of the Evenlode Global Income fund address how market momentum is firmly with the tech sector, and how the acceleration of a multi-year trend has seen steady growth companies with attractive microeconomics left in the dust, meaning valuations are at a highly unusual discount to the broader market. They also discuss increasing the portfolio’s weighting toward Information Services companies, new holdings such as SAP, and why they are watching Microsoft's cap-ex spend.
Important information
Issued by Evenlode Investment Management Limited (Evenlode). Evenlode is authorised and regulated by the Financial Conduct Authority, No. 767844.
Whilst the funds Evenlode acts as investment manager for are available to retail investors via third party providers, please note that Evenlode do not have permissions from the FCA to deal directly with retail clients and the information provided in this newsletter and on the Evenlode website is for information purposes only. If you are not an investment professional you may still wish to visit the Evenlode website to find out information about Evenlode and the funds we manage but we recommend that if you wish to obtain advice regarding the suitability of the IFSL Evenlode Investment funds for you, you should contact a financial adviser. Applications to invest in any fund referred to on the Evenlode website can only be made through a third party and must only be made on the basis of the offering documents relating to the specific investment.
This newsletter is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. The sale of shares of the fund may be restricted in certain jurisdictions. In particular shares may not be offered or sold, directly or indirectly in the United States or to U.S. Persons, as is more fully described in the Funds Prospectus.
Please note, any views represent the opinions of the Evenlode Team as at the time of writing and do not constitute investment advice. Where opinions are expressed they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. This newsletter is not intended as a recommendation to invest in any particular asset class, security or strategy. The information provided is for illustrative purposes only and should not be relied upon as a recommendation to buy or sell securities. Current forecasts provided for transparency purposes, are subject to change and are not guaranteed. Every effort is taken to ensure the accuracy of the data used in this document but no warranties are given.
For full information on the IFSL Evenlode Investment Funds, including fund risks and costs and charges, please refer to the Key Investor Information Documents, Annual & Interim Reports and the Prospectus, which are available on the Evenlode website. Recent performance information is shown on factsheets, also available on the website. Past performance is not a guide to future returns. Fund performance figures are shown inclusive of reinvested income and net of the ongoing charges and portfolio transaction costs unless otherwise stated. The figures do not reflect any entry charge paid by individual investors.
The IFSL Evenlode Investment Funds are subject to normal stock market fluctuations and other risks inherent in such investments. The value of your investment and the income derived from it can go down as well as up, and you may not get back the money you invested, you should therefore regard your investment as long term. As focused portfolios of between 30 and 50 investments, the IFSL Evenlode Investment Funds carry more risk than funds spread over a larger number of stocks. The IFSL Evenlode Investment Funds have the ability to invest in derivatives for the purposes of EPM, which may restrict gains in a rising market. Investments in overseas equities may be affected by changes in exchange rates, which could cause the value of your investment to increase or diminish.