Artemis US Select Fund update

Source for all information: Artemis as at 31 March 2025, unless otherwise stated.

Fund objective  

The fund’s objective is to grow capital over a five-year period. 

Performance 

The fund returned -14.7% over the quarter, underperforming its benchmark the S&P 500 Index¹, which returned -7.2%. The fund’s second benchmark, its IA North America NR² sector peer group, returned -8.1%.  

For full five-year discrete performance, please see below. Please remember that past performance is not a guide to the future.

Market review

In the year so far, US shares have largely been affected by two forces: tariffs (a tax on imports, which we will address in detail in the Outlook section) and the introduction of Chinese AI (artificial intelligence) company DeepSeek³.

Some of the largest US companies were expected to benefit most from AI, meaning their shares also fell the most after the January arrival of DeepSeek, which announced it had created an efficient and complex AI programme using cheaper and less advanced equipment than its competitors.

This led to a belief that US companies would cut their spending on AI, so many investors sold out of this area. However, we felt this was misguided as there was no hard evidence of a reduction in spending.

Comfort Systems represents a good example of why we felt this view was wrong. We invested in the company after the share price fell early in the year. Comfort Systems is a supplier of skilled labour, which is in particularly high demand at present as US President Donald Trump’s immigration policies are narrowing available supply. Also, the company’s ability to build data centres (buildings that house computing systems) should mean that it stands to benefit from Trump’s aim to invest in the US. We therefore think that the huge decline in the company’s share price since January seems unwarranted.

When it comes to our fund, holdings in healthcare and industrial companies proved to be the most damaging to performance during the quarter. Having a lower-than-average allocation to technology did help, but the benefit was only marginal.

We recognise that we were too optimistic in buying shares in companies that we thought would benefit from economic growth, so we have since reduced exposure to this area.

Negatives

Trucking company Saia suffered over the period because its fortunes are sensitive to industrial activity, while tariffs mean costs are likely to rise. We therefore reduced our position.

West Pharmaceutical Services is a global company that designs and manufactures advanced drug-delivery systems, such as syringes, for the pharmaceutical and biotechnology industries. Its products are also used to package and deliver injectable medications safely. In February the company reported that sales and profits for last year were ahead of expectations, but its predictions for the coming year are more conservative⁴. We have since sold out of the position.

Vulcan Materials, a producer of building materials such as concrete, faced challenges from weather-related delays to construction and uncertainty around the US economy.

Avantor, a supplier of products to the life sciences (the study of living organisms) sector, reported an underwhelming set of results and was more cautious about predicted future returns. Although the business has long-term drivers of growth working in its favour, it is facing potential pressures in the near term from a slowdown in spending on pharmaceuticals and the current uncertainty around the US economy.

Positives

Allstate is one of the largest publicly held insurance companies in the US. Although its share price fell during the quarter, it held up relatively well compared with the rest of the stockmarket. We think its attractive suite of insurance products bodes well for future performance.

Global payments business Fiserv reported profits were ahead of expectations, underpinned by better-than-expected profit margins which more than offset lower-than-expected sales.

Agricultural company Corteva specialises in seed and crop protection. We think its shares have the potential to trade at a higher price and that it could benefit from an increase in the amount of land devoted to farming in the US.

We have had an underweight (lower-than-average position compared with the benchmark) in Apple for a long time, initially because its main profit driver the iPhone was experiencing a slowdown in demand. This underweight helped the fund’s performance as the company has been notably slow in producing a fit-for-purpose AI system and creating one now would probably mean outsourcing to a competitor which would eat into profits. There are also concerns around the company’s supply chain, which is spread over Asia and therefore subject to Trump’s tariffs.

Our underweight to Alphabet, the parent company of Google, also aided the fund’s performance. We felt Alphabet’s massive expenditure on AI would harm profits whilst fierce competition from Meta would lower Google’s advertising revenues.

Activity

In advance of Trump’s ‘Liberation Day’ tariff announcements, we reduced our exposure to a number of companies we considered to be more sensitive to the economy. These included trucking company Saia, cement business Eagle Materials and investment bank Goldman Sachs. However, we believe that once the future of the US economy becomes clearer, these companies will perform strongly, and as a result we would expect to add to the positions at an opportune time.

In contrast, we raised exposure to companies that should have stable future profits. We did this by starting a position in Coca-Cola and increasing our existing position in Pacific Gas & Electric after a degree of underperformance.

Outlook

Just after the end of the first quarter came a series of monumental announcements by President Trump about tariffs. Those few days at the start of April will likely live in investors’ memories for some time. We believe that Trump is serious about implementing tariffs as a way of generating revenue for tax cuts. This is important because it suggests that despite his temporary pause, he is unlikely to completely change his mind, meaning tariffs are probably here to stay.

Recent weeks have been especially painful for larger US companies because they tend to have supply chains that are spread across a wider range of countries and receive more of their revenue from outside the US, making them more exposed to the effects of a trade war. Since the announcement of the tariffs, investors have therefore been selling out of companies that are reliant on a robust US economy and investing in areas that are deemed to be safer. Shares in technology companies and consumer discretionary (non-essential but desirable goods and services) businesses suffered the worst share price declines. Notably the companies that have led the US market rally over the last few years have been the businesses that have experienced some of the most severe falls.

It is almost impossible to predict what could occur over the next weeks and months, but in the short term we think it sensible to take a more cautious approach until things become clearer. We have therefore adjusted the portfolio in light of this more uncertain outlook for the US, reducing exposure to companies whose profits are more sensitive to changes in the economy. We have instead invested in companies that we believe are more likely to offer predictable returns and plan to take advantage of falling share prices where we feel the decline is unwarranted.