Being overweight one stock and underweight another hurt the Evli Finnish Small Cap portfolio in July, in addition to the small cap sector overall underperforming the broader local amrket, according to the latest monthly note from manager Janne Kujala.
While the total return from the Finnish equity market was -1.2% (OMX Helsinki Cap GI) through the month, the fund's benchmark Carnegie Small CSX Return Finland index did -4.8%, while the fund did -5%.
The subdued Finnish equity market performance came despite US equities again hitting an all-time high at the time, but as Kujala notes "Finnish equities have been more muted already since April."
"July wasn't any easier, with weakness most evident in our focus area of mid/small companies. Especially cyclical companies were hit after commentary of softer demand in a number of Q2 reports."
The key hit to the portfolio performance came from an underweight in Outotec - which saw its shares rise some 20% when a merger with Metso was announced. Meanwhile, an overweight in Konecranes means the portfolio took a hit when the company provided comment about weak market demand. The holding in Konecranes was reduced through the month.
On a relative basis, the biggest positive contributors to performance came from overweights in Talenom and NoHo Partners.
The three-year performance of the fund currently stands at 27.8% versus the benchmark return of 21.9%.
Kajula also manaages Evli's Swedish Small Cap fund, and here he noted that the broader market situation was somewhat different, with teh OMS Stockholm All-Share index relatively flat over the month at 0.2% gain, while the Carnegie Sweden Small Cap index gained 1.9%. The local large cap index, OMX30, declined -1.4%.
Most of the portfolio companies reported half year results in July, when the fund returned -1.2%, thus lagging the benchmark.
The key hits came from overweights in Proact IT and Gränges, both of which reported soft Q2 sales.
Overweights in AAK and Kungsleden however did the portfolio some good as they both reported solid quarters.
By sector, the biggest drags on the portfolio were overweights in IT and industrials. Stock picks in healthcare did better, such as Cellavision. There was some swapping around of holdings during the month, with an exit from Hexpol, adding to the position in ÅF Poyry, reduced holding in Thule, and the addition of a new holding in MIPS.
Over three years, the portfolio has returned 39.7% versus the benchmark's 44%.