Bellevue Entrepreneur Swiss Small & Mid

Swiss SMid caps as measured by the SPI Extra rose 3.6% in the month, outperforming the MSCI World Index (+0.4% in CHF) and the S&P 500 Index (-1.2% in CHF). The outperformance versus the US was supported by a pronounced market rotation out of software and services as next generation AI model releases renewed disruption concerns. Capital rotated toward more defensive businesses characterised by heavier asset bases and lower obsolescence risk, which are more prevalent in Europe and Switzerland, especially among SMid caps. German factory orders surprised to the upside, suggesting early evidence that fiscal spending is beginning to feed through to the real economy. However, these constructive signals were overshadowed by the coordinated US and Israeli strikes on Iran, lifting oil and gas prices amid concerns over potential supply disruptions and spreading instability. The Eurozone Composite PMI rose to 51.9 in February, signaling continued expansion. Activity was supported by a resilient services sector (51.9), while manufacturing moved into expansion territory (50.8). In Switzerland, the procure.ch manufacturing PMI declined to 47.4 from 48.8 in January, signalling continued contraction in the sector, driven by weaker production and a decline in order backlogs, down 0.8 points to 46.9. On the positive side, purchasing volumes showed some improvement, increasing by 2 points to 45.1.

From a sector perspective Consumer Staples (+10.5%), Materials (+7.2%) and Real Estate (+7.1%) performed best while Information Technology (-1.3%), Financials (+1.6%) and Health Care (+2.4%) lagged the most.

Against this backdrop, the Fund rose 1.7%, underperforming the benchmark by 199bps, bringing the annual performance to 4% (-185bps).

Main detractors in the month were ALSO Holding (-17.6%), Medmix (-17.5%) and SoftwareOne (-14.9%). ALSO reported disappointing FY-2025 results, impacted by challenging competitive conditions weighing on H2 profitability. The 2026 guidance was cautious but the start of the year appears to be encouraging. Demand remained positive, supported by AI-driven investments and the ongoing replacement cycle linked to Windows 11. Despite soaring memory prices, no supply disruptions have been noted. Medmix, reported in-line FY-2025 results with stronger profitability. The share was weighed down by the guidance for flat to LSD growth, making 2026 a year of transition. SoftwareOne was impacted by continuous sector derating. Besides peak AI fears, the market is overlooking the Crayon synergies - representing as much as 30% of EBITDA - which should begin to materialize in 2026.

Top 3 contributors were Huber+Suhner (+18.7%), Lindt (+14.5%) and Burckhardt Compression (+16.4%). Huber+Suhner continued its upward trend, supported by strong momentum around AI-related themes and large capex announcements from hyperscalers.. Lindt & Sprüngli benefited from solid FY results. The 2026 outlook was as usual constructive with of 6% - 8 % revenue growth and 20 to 40 bps of margin expansion. Easing cocoa prices should also support meaningful cost savings that can be reinvested into marketing to help restore volume growth. Burckhardt, worldwide leader for reciprocating compressors, recouped some of its underperformance with no specific news. H1 results were published back in November and order intake was hit hard (-35%) by the uncertainties following liberation day. While system orders are lumpy, we would expect this to normalise as commented by other industrial companies. The stock trades at an attractive 20% EV/Ebitda discount to its 5 years average but requires some patience.

The events in Iran have challenged equity markets, also in Switzerland. There are three main risks from a prolonged conflict. 1) Higher oil prices, especially for energy-intensive sectors, commodity industries and structurally low-margin businesses with little pricing power. 2) Rising inflation and consequently higher long-term interest rates, which could negatively affect equity valuations, particularly for long-duration assets, highly leveraged companies. 3) Potential deflationary dynamics, which could lead to profit-taking in cyclicals and in momentum stocks given the potential high downside to trough valuation. Overall, the portfolio is well balances and we have very limited exposure to highly energy-intensive businesses. Most companies enjoy strong pricing power and super solid balance sheets, a characteristic of our Entrepreneur approach. Our industrials exposure is geared to structural winning – and still valid - themes like electrification and energy sovereignty offering resilience in an energy stress test scenario.