The theme related to Covid-19 seems to be losing momentum since the peaks achieved at the beginning of the summer, which translates into a short-term underperformance of some e-commerce segments such as the delivery of meals at home ( Delivery Hero, Hello Fresh…), dematerialization and the Cloud (Docusign, Teamviewer, Wix…), biotechnologies (Moderna, Argenx…) or even hygiene products (Clorox…). This underperformance comes after a spectacular run and in the wake of the market's hopes for the arrival of new treatments (see authorization from the US administration of blood plasma treatment) and / or a vaccine with a possible procedure for fast tracking of AstraZeneca vaccine by the US government. In addition, a peak in new infections was reached in the USA at the end of July, and the second wave which is raging in Europe seems to cause fewer hospitalizations and fewer deaths. This rotation is not benefiting banking and cyclical stocks (apart from Chemicals and Construction) so far, but rather another technology segment, namely the Software and IT services sector.
The US and European software sector appears to be strengthened in the short term by results well above expectations for Intuit and Salesforce, which also entered the Dow Jones 30 instead of Exxon. These 2 stocks are on all time highs, following in the wake of other emblematic US companies such as Adobe and Autodesk. The European software sector, still strongly correlated with the American sector, is starting to follow the same path with an ongoing bullish recovery for players such as SAP, Dassault Systèmes, Software AG or Nemetschek. The IT services industry, which largely depends on the integration of systems and software, is also taking the lead. Buy signals recently appeared on a number of mid-caps in Europe (SQLI, Aubay, Sword, Sopra, etc.) while a bullish signal was triggered on Cap Gemini on the Phiadvisor platform on July 29, Infosys on June 29 and Accenture on June 1st.
We change our portfolios accordingly, taking profits on "Covid stocks" favoring themes that benefit from a strong upward trend in the short and long term and stocks with a good "risk / reward". We select stocks which show a marked outperformance linked to their theme, which are in buy signal (Trading Signal and Megatrend Signal), and which display high quality ratings in the Phiadvisor application, with limited correlations between them and with the broad indices.
The performance of our portfolios should be considered in relative terms / market (portfolios systematically invested at 100%), while the cash allocation is also determined by our top down indicators (Market Pressure Index and Spread momentum).
Portfolios are available and updated in the Phiadvisor app on a daily basis.
Core US portfolio
Perf (since 01/01/2020) : +22.9% Alpha +16.4%
Clorox (CLX-US) : We take our profits on Clorox after a strong bullish run (+26% from entry) and weakening bullish momentum ;
DraftKings (DKNG-US) : We select DraftKings for its strong bullish momentum linked to the e-gaming theme.
Megatrend Europe portfolio
Perf (since 01/01/2020) : +11.2% Alpha +20.7%
Sanofi (SAN-FR) : We exit the stock due to the weakening momentum.
Dassault Systèmes (DSY-FR) : We select Dassault Systèmes for its strong bullish momentum linked to the software theme.
Tactical Europe portfolio
Perf (since 01/01/2019) : -0.4% Alpha +9.1%
Delivery Hero (DHER-DE) : We take our profits on the stock after an impressive bull run (+42% from entry) and as the bullish momentum is weakening.
Nemetschek (NEM-DE) : We select Nemetschek for its strong bullish momentum linked to the software theme.