Liontrust US Opportunities Fund Q4 2021 review | Insights

Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

The Liontrust US Opportunities Fund returned 8.2% in the fourth quarter, versus the S&P 500 Index return of 10.4% and the IA North America sector average return of 7.8% (both comparator benchmarks)*.

US equity markets continued to rally in the final quarter, capping off a strong year of gains. The US economy entered the final quarter of the year rebounding from the Delta wave that was prevalent during the late summer. The dominant debate continues to be around inflation and whether this will cause the Fed to tighten monetary policy quicker than otherwise might have been expected. One of the drivers of inflation has been the widely reported supply chain challenges and this was the predominant focus during the earnings season reported during October. Despite margin pressure emerging in many sectors, earnings from US companies in general continue to be impressive and are clearly benefitting from a strong demand environment.

Markets were also supported by the much-vaunted Infrastructure Bill, which finally got passed in November with Congress passing a $1.2 trillion package. This includes $550 billion of new federal investments in America's infrastructure over five years, touching everything from bridges and roads to the nation's broadband, water and energy systems.

Covid continues to add uncertainty and volatility to markets. The outlook for the trajectory of the pandemic was positive for most of the quarter with Delta rolling over and the announcement of successful antiviral pills. However, the news of the latest variant, Omicron, struck in December. Initial expectations of a more virulent but less severe wave seem to be playing out with the hope that we can transition to an endemic phase over time. It is clear there is no appetite for further lockdowns and the US has learnt to live with Covid better than most economies around the world.

The other notable factor has been the shift in rhetoric from the Federal Reserve and subsequent expectations for the interest rate trajectory. In December, the Fed made it clear they recognise that inflation is less transitory than initially hoped and will accelerate plans to taper quantitative easing as well as signalling interest rate hikes will occur much earlier in 2022. This change in outlook has helped yields, both nominal and real, to beginning normalising which in turn has hit the valuations of highly valued, high growth companies.

The US Opportunities Fund underperformed the S&P 500 Index during the quarter but was slightly ahead of the wider peer group. As has been the case for a number of years now, the majority of the performance has been from stock specific factors but the main detractors in the period were our holdings in the software space. More generally these companies fell foul of the shift in sentiment towards more high growth, high valuation companies but we also suffered from some idiosyncratic factors including amongst others unexpected management change. On the other hand, stronger performers this quarter included companies that are benefiting from a strong outlook for the housing market and infrastructure beneficiaries.

From a stock perspective, Calix was the top performer over the quarter. The company’s cloud and software platforms enable service providers of all types and sizes to innovate and transform. Calix’s customers are able to utilise the real-time data and insights from Calix platforms to simplify their businesses and deliver experiences that benefit their subscribers. Over the quarter, the company performed strongly off the back of reporting it third-quarter results, with the company announced that total revenue, exceeded the high end of their guidance range, increasing more than 14% compared to the year ago quarter.

Intuit was another strong performer over the quarter. The US financial software company rose after reporting strong quarterly results and raising its annual guidance. Intuit reported fiscal first-quarter earnings of $228 million, on sales of $2.01 billion, up from $1.32 billion a year ago. The company also added more than $1 billion to its revenue guidance for the full year, crediting the $12 billion acquisition of MailChimp, which was finalised on 1 November, as well as last year’s purchase of Credit Karma, which reported record quarterly revenue of $418 million.

In terms of portfolio activity, we have made relatively minor changes to the portfolio and have been focusing our attention on companies and industries which we think we will structural beneficiaries of the post-Covid world. We continue to believe that disruption, and particularly digital disruption, will remain the most important determinant of corporate success. We continue to search for companies that we believe will be drivers of this disruption (disruptors), help fuel it (enablers) or indeed benefit from it (embracers).

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

	Dec-21	Dec-20	Dec-19	Dec-18	Dec-17
Liontrust US Opportunities C Acc GBP	27.7%	23.7%	28.2%	1.1%	17.4%
S&P 500	29.3%	14.1%	25.7%	1.0%	10.6%
IA North America	25.5%	16.2%	24.4%	-1.4%	10.5%
Quartile	2	1	1	2	1

*Source: FE Analytics as at 31.12.21

**Source: FE Analytics as at 31.12.21. Quartiles generated on 07.01.22

Understand common financial words and terms See our glossary

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.

Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.

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. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust. Always research your own investments and 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.