We have been shareholders in Microsoft for 15 years and we were pleased to see their annual results beat all expectations and send shares back toward all-time highs. Standard Chartered shares have enjoyed an excellent run on the back of higher rates (banks make higher margins when rates increase) and market share gains, while Euronext (the European stock exchange operator) have been beneficiaries on higher trading volumes.

Rebuilding Energy Exposure

We began rebuilding Esk’s exposure to energy prices with the addition of ExxonMobil, the US oil major, last quarter and in September we initiated a position in Cheniere Energy, who own the Sabine Pass and Corpus Christi terminals, the two largest LNG export facilities in the United States, which together account for approximately 60% of US LNG exports. In a world where gas supplies from the East remain political and patchy, we see the US as the favoured gas exporter for the foreseeable future and Cheniere are the toll road.

InterContinental Exchange Group (ICE) is one of the largest listed exchange and clearing businesses (much larger than the Euronext) and we have long been admirers. They are known for owning NYSE, however their largest profit driver is ICE Futures, the primary global platform for Brent Crude and LNG futures. ICE shares had a rare soft patch over the summer, and we took the opportunity to build a position.

Exceptional Businesses

Aside from energy, we also added the gold royalties business Franco Nevada, US rail-road operator Union Pacific and Meta Platforms (owner of Instagram, WhatsApp and Facebook). We see all of the above additions as diversifying the portfolio into new themes, while at the same time buying in exceptional businesses with unique assets. For example, Union Pacific’s 8,300 locomotives and 32,200 miles of railroad, Meta’s 3.6bn daily average users and ICE’s near-monopoly in Brent futures are each wonderful things to own and extremely difficult to compete against.

We funded these additions from cash and the disposal of three positions that were not performing for us. LVMH, the luxury goods giant, have seen shares fall sharply on concerns that demand from their key Chinese market will not recover. On review, we agreed with the doubters and took our medicine. Nestle also leaves the Fund as we feel that their best years of growth are behind them and we cut our relatively new position in TransDigm (the supplier of aerospace parts) as we felt that their use of debt to fund acquisitions would be increasingly difficult against the backdrop of higher rates.

Recycling Capital Into New Opportunities

More recently, we have been taking some profits on our Apple holding and recycling the capital into Amazon and McDonald’s, both of which we see as trading at attractive levels. Amazon, in particular, are clearly making remarkable progress monetising their cloud assets to host AI models and, just as AWS became the backbone of the cloud era, Amazon looks well placed to be similarly foundational to the AI value chain – they have form in managing logistics-heavy infrastructure and we are backing them to succeed again.
 

The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note that the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.