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State of the Industry: July 2018

Muhammad Suhaib Analyst, Client Analytics

Health Care and Industrials soared above the other sectors in July, and the Consensus Index led the 4Cs for the first time this year.

For the interactive version of this report, please head to our State of the Industry dashboard.

US and European indices in July made for a strong start to Q3 2018 (S&P 500 up 3.72%, and Euro Stoxx 50 up 3.99%). Japan’s Nikkei 225 also experienced positive returns (up 1.12%). Figuring in YTD, S&P 500 takes the lead among the three at 6.51%, followed by Euro Stoxx 50 at 3.15%, and lastly, Nikkei 225 coming in nearly flat, at 0.01%.

The Novus Hedge Fund Universe (HFU) posted 2.06% for the month of July, bringing YTD performance to 6.06%. For the first time in months, the S&P 500 outperformed the HFU.

Looking at the Novus 4C Indices for a moment, the Consensus Index led the way (up 3.81%) for the first time this year. Consensus’ biggest contributors were financial stocks, including Bank of America Corp (BAC), which was also amongst the top five alpha generators for the month. Netflix (NFLX) was the outsized detractor for the flagship Conviction Index. Year to Date, the Concentration Index still stands as the clear winner (up 22.61%), taking the lead by at least 11.71% over its peer indices. The outsized performer for the month in the Concentration index was Zogenix (CVNA).

 

Taking a cross-sectional view of the HFU, performance by sector shows that while almost all sectors generated positive returns, almost all detracted alpha too. Industrials was the top performer (up 5.21%), followed by healthcare (up 4.49%). Year to date, Telecommunication Services has been the highest alpha generator at 7.53%, with the highest upward contribution coming from OIBR.C. The biggest alpha detractor is Consumer Discretionary at -6.42%, with the highest downward contribution being Charter Communications (CHTR).

The top five performing funds, as seen in recent months, have all been well below $1BN in reported Long Market Value (LMV). CPMG, at an LMV of $329.3MM, reported the highest performance (47.11%), driven mainly by Reata Pharmaceuticals (RETA), which experienced a price surge after encouraging mid-stage trial results. CPMG has held a high conviction position (>50%) in the stock since December 2017.

State of the Industry reports are created using Novus Public Ownership data.

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