As tariffs dominate the news headlines

February 2025

As tariffs dominate the news headlines, let us consider a concrete example in the form of Stella International, a shoe manufacture listed in HK with around half of its revenue coming from the US. There are a couple of things worth highlighting. First, only 25% of their manufacturing takes place in China and this capacity is predominantly used to serve Chinese clients. Second, their client base is high end (think Balenciaga, Jimmy Choo and Air Jordans), so the end retail price is many multiples of their ASP at just $28 per pair. So even if the tariff did apply to their products, a 20% tariff would be c. $6 on shoes that sell for well over $100. It would be considerably more costly to try to move the production line away from Asia altogether. Yes, there is a risk here, and it weighs on sentiment, but at c. 10x earnings, which are growing on the back of strong client relationships, with cash on the balance sheet and a 7% dividend yield, we’re happy with Stella as the largest position in the Fund.

On a different note, we very much enjoyed speaking with the thoughtful Demetri Kofinas on his Hidden Forces podcast – you can find the link here.

As always, please find our latest fund factsheet here.