We initiated a position in US-listed global healthcare supplier, Becton Dickinson, following a review of the company. Its non-cyclical revenues and historical sales performance in lower growth periods appears attractive given the uncertain economic outlook, as well as the societal benefit that its products provide to the healthcare market. We also added to our position in German medical group, Fresenius SE, as the outlook for the company appears to be stabilising following its profit warning late last year. Our position in US rail operator, Union Pacific, was sold following review, as we now see the benefits of efficiency gains increasingly embedded into the share price, and future performance depends on the more cyclical volume outlook.
Broader positioning remains unchanged, with an ongoing bias towards higher quality, sustainable growth companies that can prosper in any near-term economic and policy-driven volatility. We continue to add to positions where we see strong underlying quality and where the market allows us to top up holdings at more attractive levels. And where appropriate, we have been building positions that offer more defensive revenue streams given the slowdown in economic growth expectations and trimming holdings that have performed strongly and offer reduced upside potential.
Sector-wise, information technology, industrials and healthcare are our main overweights. The portfolio is underweight communication services, energy and consumer staples. At the regional level, Emerging Markets and Japan are our biggest overweights, with the U.S. our largest underweight.
Interest rate cuts offset recession fears – we remain vigilant but constructive on equities
September saw the benchmark rise as sectors of the market that have underperformed this year, such as banks and energy, recorded the biggest gains. In the absence of clear direction, we have seen some profit-taking by investors on shares that have performed strongly in recent quarters – and where valuation support is less obvious – and reinvested into better ‘value’ names. After improving a little in recent months, overall economic data during September was weaker than expected and investors seem to be factoring in a slightly higher possibility of a recession. In terms of markets, this was offset by further monetary policy easing, with central banks announcing interest rates cuts and renewed buying of bonds. We remain vigilant but also constructive towards global equities.