Liontrust US Opportunities Fund Q1 2024 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.

Over the quarter, the Liontrust US Opportunities Fund* (the ‘Fund’) returned 12.1%, compared with 11.5% by the S&P 500 Index and an average performance of 7.2% by funds in the IA North America sector.

US equities posted a positive return in Q1, driven by strong contributions from technology companies as enthusiasm around artificial intelligence (AI) drove the sector higher. In addition, expectations of interest rate cuts also boosted shares, though the pace of these cuts is likely to be slower than the market had hoped for at the beginning of the year.

Positive stock attribution

The most significant contributor to performance over Q1 2024 was Nvidia, the global chipmaker specialising in AI. The company saw its shares more than double in 2023 as it delivered rapid earnings growth. Despite significant subsequent upgrades to analysts’ earnings expectations, Nvidia continues to benefit from the bullish sentiment around AI. It still managed to exceed consensus with Q4 revenues of $22.1billion and EPS of $4.93, beating forecasts of $20.4 billion and $4.59 respectively. The shares continue to ride a wave of AI excitement, with incremental data points from early AI adopters such as Klarna showing strong productivity gains.

Installed Building Products was once again among the top contributors to portfolio performance, also rising on the back of Q4 results. The company recorded a 5% increase in net revenues to $721 million, with adjusted gross profit margins expanding to 34.1%, up from 31.7% a year earlier.

Also among the top performers over the period was Meta Platforms, the mega-cap technology company, following announced plans to buy back an additional $50 billion in shares and issue its first-ever quarterly dividend. Meta also impressed with its earnings release, reporting strong fourth-quarter results, including a 25% gain in sales and profits that tripled. Furthermore, the company also projected revenue growth for the current period that surpassed average estimates.

Amazon was another portfolio holding to report robust earnings, announcing strong sales with fourth quarter revenue increasing 14% to $170 billion. In addition, Amazon provided an operating income outlook that surpassed average estimates.

Negative stock attribution

Among the detractors for the period was LGI Homes, the entry-level homebuilder. Around the halfway stage of the quarter, shares in LGI Homes fell after its fourth quarter earnings release came in below expectations. While home sales revenue increased by 2.3% year-on-year to $2.4 billion, analysts were underwhelmed with its Q4 EPS and disappointing 2024 guidance.

Adobe was another to finish the quarter in negative territory as competition concerns were revived after it abandoned the Figma deal. It is also suffering somewhat from a shift in perceptions from AI winner to AI loser after the release of OpenAI’s Sora for AI generated video.

Travel technology company Sabre was the largest faller in terms of total returns after reporting Q4 bookings that missed estimates, while the company’s full-year guidance for revenue and adjusted EBITDA also fell short of expectations.

Outlook

Central banks on both sides of the Atlantic hinted in March at rate cuts this year, to which equity and bond markets reacted positively. However, the signals will likely change if the inflation trend inflects. We are pivoting from our previous expectations of lower inflation and interest rates, thanks largely to economic data.

While we had expected the tailwind from lower shelter inflation to come through in the US, inflation has proven to be sticky the last few months. If anything, inflation on a month-on-month basis has started to accelerate. If inflation continues to be stubborn, then this will weaken the Federal Reserve’s impetus to cut interest rates in 2024. US and global economic data point to strengthening growth, which will add further upside pressure to inflation and reduce the likelihood of rate cuts.

Given this change in our outlook, we have trimmed our positions in interest rate sensitive sectors such as housing. These stocks have performed very well, so are now pricing in positive outcomes, while the macro interest rate environment may begin to deteriorate for them. Instead, we are reallocating capital to more later cycle sectors such as cybersecurity, that may benefit as accelerating growth comes through. The valuation of some of these stocks are also much less demanding relative to their history.

Making macro forecasts is a hazardous pursuit. Instead, we prefer to diversify our portfolio broadly, focusing more on idiosyncratic risks and opportunities. However, we must also remain aware of what scenarios are priced into the stocks, which drives our risk/reward framework. This has helped inform some of the recent rotations in our holdings.

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

	Mar-24	Mar-23	Mar-22	Mar-21	Mar-20
Liontrust US Opportunities Acc	31.5%	-11.8%	14.5%	48.6%	-3.1%
S&P 500 Index	26.5%	-2.2%	20.7%	39.8%	-2.8%
IA North America	25.1%	-4.0%	16.1%	42.4%	-4.0%
Quartile	1	4	3	2	3

*Source: FE Analytics, as at 31.03.24, total return, net of fees and income reinvested

** Source: FE Analytics, as at 31.03.24, primary share class, total return, net of fees and income reinvested

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 the Fund involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates.

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.