For the month of August, Evenlode Global Opportunities returned +3% compared with +2.6% for the MSCI World Index (USD terms). August continued the reversal in market leadership that became visible in July, as highly priced technology stocks came under pressure while a number of out-of-favour software and data companies continued to recover.

During August, the best-performing stocks in the portfolio were data and information services companies. Leading relative contributors included Broadridge, Amadeus, Experian, RELX, Wolters Kluwer and Booking Holdings. We have discussed this group of “AI underdogs” in previous factsheets. Earlier in the year, these companies were indiscriminately penalised by the market amid concerns that advances in AI could disrupt their established data and analytics businesses. We have consistently argued that their proprietary datasets, deeply embedded workflows and long-standing customer relationships make these franchises highly durable and  incredibly difficult to replicate or displace. In July and August, market sentiment began to align more closely to our own, as operating results provided evidence that these businesses can continue to grow revenue and profits by utilising the new technology themselves. We think this incipient rally signals a growing admission that, in responding to the perceived threat from AI,  the market overreacted substantially in derating these high-quality businesses.

At the same time, several technology favourites continued to weaken. We have previously noted that elevated valuations create demanding expectations. When a significant amount of future growth is already reflected in the share price, a company needs to post exceptionally strong results just to meet those expectations. August offered a reminder that trees do not grow to the sky.

Our approach remains focused on investing in quality, cash-generative companies at sensible valuations. The recent rotation in market leadership creates a supportive environment for the portfolio as we move through to the second half of the fund’s financial year. Over the three months to the end of August, the fund returned +8.0% versus 2.4% for the index. We believe there remains meaningful scope for further upside as fundamentals reassert themselves, particularly where strong businesses continue to trade at highly discounted valuations that, in our view, do not fully reflect their long-term prospects.