Performance, Commentary & Portfolio

Fund Manager’s Review

US stocks posted their fifth straight monthly gain in September, with the S&P500 adding 3.5% in dollars and the tech-skewed Nasdaq gaining 5.6% - the AI investment frenzy remains alive and well. Outside the US, markets were also reasonably strong in Europe and Asia with gains here centred on technology, too. Outside of tech-related sectors the gains were far more muted.

Brunner’s Net Asset Value (NAV) total return for August was 1.91%, behind the benchmark return of 3.31%. Our best performing stocks reflect this momentum. Dutch semiconductor capital equipment company ASML was up 31% during the month whilst Taiwan Semiconductor (TSMC) was up 22%; these were the top two contributors to performance during the period. TSMC is the world’s largest semiconductor ‘foundry’ and the de facto monopolist in manufacturing the most advanced artificial intelligence (AI) chips on behalf of clients like Nvidia and Broadcom. They rely on lithography machines made exclusively by ASML to do so. Other companies in the top ten contributors this month include Amphenol and Schneider Electric, who provide connectors and electrical equipment used in AI data centres. Whether the current, extraordinary amounts being spent on AI infrastructure are sustainable is a question of much debate

Alphabet also performed well. Early in September a judge rejected calls by the Department of Justice to break up Google, a decision which should allow the company to maintain its distribution might. Coupled with the lowest multiple amongst the ‘Magnificent 7’ stocks, and a growing realisation that its AI mode plus ubiquitous availability is a powerful combination meant that the stock powered forward, becoming the latest tech giant to exceed $3 trillion in market capitalisation. Outside the tech sector, GE Aerospace and Bank of Ireland both helped performance. Both have been exceptional equities this year driven by both solid results plus a substantial re-rating. Momentum has been a key factor in this year’s market.

Negative contributors to performance were varied. Most of them were guilty of nothing more than not keeping up with the tech bull market. Generally, they were asset-light, intellectual property rich companies such as Corpay (corporate payments), Paycom (human resources software) and S&P Global (credit ratings, stock market indices). There is, perhaps, a sense that companies of this nature are fragile in a world of readily available, cheap, automated intelligence; a conclusion that we would heavily dispute. There have been no material recent changes to earnings estimates at these companies, but a large portion of an equity’s value is derived from profits anticipated well into the future. Any sense of threat to this terminal value can therefore have a material impact. A couple of large index weights we don’t hold also hurt relative performance. Shares in Tesla were up 34% in the month. Retail speculation in stocks like Tesla is rampant and doesn’t appear to consider matters as mundane as valuation or fundamentals. We note that the c$1.5tr enterprise value of Tesla is more than 80x that of Korean automaker Kia, yet the latter makes more actual money.

There were no trades this month.

Julian Bishop & Christian Schneider
14 October 2025

This is no recommendation or solicitation to buy or sell any particular security. Any security mentioned above will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date.

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