Liontrust Global Dividend Fund

The Liontrust Global Dividend Fund returned 6.4% in Q2, compared with  the IA Global Equity Income sector average of 0.5% and the MSCI World Index return of 2.6% (both comparator benchmarks)*.

The Fund’s Q2 outperformance was driven by large gains across a range of holdings, particularly those participating in IT sector strength; Nvidia, Taiwan Semiconductor Manufacturing Corp (TSMC), and Apple were the biggest contributors. Slightly offsetting this was some share weakness in Estee Lauder, and Starbucks.

Shares in Nvidia, the semiconductor chip designer at the centre of an AI boom, continued their surge higher in the second quarter driven by improving fundamentals. The company reported that it expects Q2 revenue to come in around the $28 billion mark, topping consensus estimates and reminding investors that we are only 5 minutes into the football match when it comes to the AI compute buildout.

Furthermore, the rate of progress achieved by Nvidia with each new computer architecture shift − from Hopper to Blackwell and beyond − indicates that we are still in the early stages of this technology's development and potential. Nvidia is making increasing strides with each new architecture, suggesting that the pace of advancement in AI hardware is accelerating rather than slowing down. These factors highlight the robust growth and potential challenges in the AI buildout, emphasising the importance of sustained investment and innovation in AI infrastructure.

As the world’s largest semiconductor manufacturer and key supplier to Nvidia, Taiwan Semiconductor Manufacturing Company (TSMC) is also at the forefront of what we believe will be the biggest infrastructure buildout in history, due to the transformational nature of the a new AI-driven technology cycle. In the first quarter of 2024, TSMC recorded 17% year-on-year revenue growth driven by demand for its advanced technologies unit – defined as 7-nanometer and below – which accounted for 65% of total wafer revenues. As TSMC builds out additional advanced packaging capacity and captures more of the economic profit in the emerging AI compute market, we expect TSMC to re-accelerate earnings from tough 2023 levels. When you combine this dynamic with an emerging cycle in edge devices, TSMC has a very positive 5 year outlook.

Apple performed strongly in Q2 driven higher first by the announcement of stronger-than-expected quarterly sales and the largest share buyback in history, and secondly by the long-awaited unveiling of its AI platform, Apple Intelligence, which enables Apple to tap into investor excitement around AI. Apple introduced a range of new AI features during its annual developer conference (WWDC), including an overhaul of its voice assistant Siri, integration with OpenAI’s ChatGPT and a range of writing assistance tools. While Apple pitched these AI for the average person, users will likely need to upgrade their iPhones to access the tools. Apple started the quarter as one of the largest positions in the Fund due to negative market sentiment towards the company, however as its stock price responded to positive news we reduced our position down to 2.6% following a large move.

Shares in US cosmetic company Estee Lauder weakened after lowering its full-year revenue guidance, citing macroeconomic pressures particularly in China, while its adjusted EPS guidance for Q4 fell short of consensus estimates. The company announced that it expects sales to decline as much as 3% compared with a prior forecast for a range of -1% to +1%, a sign the cosmetic company’s turnaround efforts are facing challenges, which Estee Lauder attribute to “ongoing macroeconomic headwinds, including continued softness in overall prestige beauty in mainland China, and geopolitical volatility in some areas around the world”. While the company continues to experience a more difficult end market than expected, when it exits this cyclical weakness we expect the stock price to significantly rebound from current levels.

Starbucks fell sharply after posting quarterly earnings and revenue that came up short of consensus estimates amid an unexpected decline in both U.S. and international same store sales. The company reported a 4% decline in same-store sales in the latest quarter. In China, same-store sales fell 11%. The company stated that its quarterly results were adversely impacted by unseasonably cold weather in January which affected store visits across the industry, a more cautious consumer around the world and the conflict in the Middle East. We exited the company during the quarter as channel checks highlighted the emergence of new competition across key markets as new retail space became available for competitors as retail structural shift to online retailing resumed.

Overall, across the portfolio we were more active than usual as stock price volatility in certain areas of the market meant we continued to manage position sizes. During the quarter, we significantly reduced our technology weights as stock prices moved up, while we increased our weightings in the consumer sectors where stock price weakness started to offer great opportunities. We remain very optimistic about the future returns of the funds with a significant level of competition for capital across the Fund and watchlist.

Discrete years' performance (%) to previous quarter-end*:

*Source: FE Analytics, as at 30.06.24, C accumulation share class, total return, net of fees and income reinvested. Fund inception date is 20.12.12; the current fund managers’ inception and change of strategy date is 31.08.17.

KEY RISKS

Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.

The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

Overseas investments may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of the Fund. This Fund may have a concentrated portfolio, i.e. hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the Fund's value than if it held a larger number of investments. The Fund may encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings. Outside of normal conditions, the Fund may hold higher levels of cash which may be deposited with several credit counterparties (e.g. International banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash. Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails. The level of income is not guaranteed.

DISCLAIMER

This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.

This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.