In contrast with the volatility of previous months, June was universally negative with very few sectors outperforming. Again the resources stocks tended to outperform while financials and those more exposed to the consumer underperformed. Investor sentiment turned increasingly negative as soaring commodity prices, rising bond yields, and negative central bank commentary all served to spook investors. Given the increased risk aversion investors again sought solace in larger capitalisation stocks with small and mid-caps underperforming. The Fund underperformed the FTSE-All Share index.
At the individual stock level there was little fundamental reason for the majority of the moves. A number of stocks, such as Invensys and CRH suffered as investors became concerned over the cyclicality of their profits. Another major disappointment was Sevan Marine which fell 22% despite announcing a series of contract wins. Other negative contributors included Innovation Group and the life assurers, Aviva and Old Mutual. Positive performances came from Valiant Petroleum, Amec, Elementis and Tullow Oil.
New positions were taken in Chemring and Johnson Service. Holdings in Amec, BP and Intertek were exited.
Support Services
As companies increasingly concentrate on their core competencies, demand for support services has risen. In particular, those supporting the oil industry have benefited from the upturn in the cost of crude oil and historical underinvestment in infrastructure. These companies are better equipped to carry out non-core activities for clients and have seen sales and margins rise sharply.