Equities

While higher interest and inflation rates may more predominantly impact owners of long-duration assets in a variety of ways, they are also simply a positive signal of strong economic growth, which is a good thing. They also should enable for a more generally healthy pricing environment for risk assets. Higher interest rates are not necessarily something terrible to be only feared.

With US President Biden’s $1.9 trillion Covid relief package, alongside the recently proposed $2.25 trillion in infrastructure projects, there is growing concern about the impact these programs could have on inflation and interest rates globally. In the investment world, we have been operating amid declining rates and low inflation for so long that few may realize the impact rising rates would have on investment returns.

Stop fraud bleeding returns. Fraud from related party transactions, kickbacks and fiddling the books can run for years. The steps to minimize risk are based on 3 governance structures – independence from management is key. Amazing how often they are not in place, especially in some markets.

All-star New York Yankees pitcher Lefty Gomez once said: "I'd rather be lucky than good.” Successful investing over time is, however, not a game of luck. It requires discipline, skill and a focus on quality. Investors can prepare for a downturn by focusing on quality businesses with predictable earnings growth.

What makes the internet high-speed, a phone smart and many other consumer products safer and more efficient? Semiconductor chips. They are at the heart of emerging technologies. We believe the industry has entered a new phase of growth that is characterized by higher profitability and lower earnings volatility.

While COVID has been a key source of disruption across multiple facets of our lives, the virus-induced effects have served a useful purpose by accelerating some important business trends that were already underway. We can all agree data proliferation and the continued digitization of the world certainly are not slowing. What's less clear is which companies will benefit.

How do you identify risk from water stress? This blog looks at causes and vulnerability by business and location. Population growth of 750 million this decade and climate change will keep water stress rising. Companies need to adjust to the value of water before the market prices for scarcity.

Alibaba had hoped to position Ant with a greater emphasis on the “tech” part of the business and the margins and returns that usually accompany that model, but now it clearly could be a much less profitable, albeit still very large and successful, financial holding company. Portfolio manager Brian Bandsma breaks down what increased regulatory scrutiny means for some of China’s large internet companies.

The market craves stability and transparency. As an efficient auction mechanism, it relies on visibility to price stocks and economic activity. Typically, the market—and people in general—do not like change, but this time, as we stand at the precipice of a tremendous change, what we are seeing is actually a potential return to real stability, normality and transparency.

Tesla’s current valuation reflects aggressive assumptions about its dominance of the electric vehicle market and its ancillary businesses. While parts of Tesla’s exciting story may materialize, progress is unlikely to be as linear as the market suggests. In fact, the market may be overlooking several key risks

Understanding potential value destruction from climate change is challenging. A strong framework can significantly improve visibility. There are hundreds of companies that appear to have value at risk from climate change greater than their market capitalization – climate zombies. Insights on where to find, and value, risks in this blog.

Unlike horses that need blinders to keep them narrowly focused on winning a race, investors should expand their field of vision to consider the risks around them. Matthew Benkendorf, CIO of the Quality Growth Boutique, shares 5 principles that are critical to help successfully navigate emerging markets.

Charlie Munger, Warren Buffett’s brilliant partner, famously remarked that their investment approach was “simple, but not easy.” After nearly 40 years of investing, Portfolio Manager Ed Walczak explores how the Quality Growth team aims to overcome the many challenges investors face today in determining the “true” value of a company.

History is a good reminder that it is difficult to predict market reactions, and that elections do not have as tremendous consequences on markets as people may believe. Market anxiety over election impact is generally over-exaggerated. The underlying health of the economy and corporate profit growth, ultimately, are the factors that will impact stock prices.

Many emerging markets are more resilient to external shocks than in the past and can better withstand the pressures of a stronger US dollar. And so far, many EMs have been fairly conservative in their use of stimulus in response to Covid-19. This increases the potential for prosperous times ahead.

The ongoing trade war and eroding U.S.-China relationship have been a catalyst for making it less attractive for Chinese companies to seek a public listing in the United States. The Chinese government is finally making good on promises to open up domestic markets to foreign investors. Additionally, Hong Kong and China are taking steps to make local listings more attractive, especially to high-tech start-ups.

Our equity experts from the Quality Growth Boutique are constantly trying to find exceptional companies. In this insight, they explore businesses that may be high quality today that were not in the past. Does the current COVID crisis change the playbook for investors in any way?

Ethnic minorities account for 40% of the US population, 29% of bachelor degrees, but just 16% of Fortune 500 board seats. Sub-conscious bias plays a big role. A structured approach to hiring and mentoring are required for change. Diversity can drive innovation and shareholder returns.

Like a pendulum, once equity markets swing one way, they will swing back. Investors can manage market swings by actively allocating to international equities using 3 timeless tactics: diversification, exposure to a unique opportunity set of strong businesses, and buying at attractive valuations.

Portfolio Manager Ed Walczak and Client Portfolio Manager Grant Bughman provide an update on the markets, US Equity portfolio positioning and outlook.

3 steps to help navigate the storm: recognize change, keep an eye on your horizon, and get ahead of structural shifts that will follow the shock of death and economic damage. How we frame the crisis in terms of capital preservation and recovery will affect investment decisions.

We are now witnessing a market panic as the continued spread of the coronavirus is threatening a global recession. Portfolio managers Ramiz Chelat, Jin Zhang and David Souccar explain how they are adjusting their portfolios to take advantage of market dislocations and why quality growth businesses can help provide downside protection.

Modern slavery affected an estimated 89 million people during the 5 years to 2016 – more than Germany’s population. Its profits creep into our homes through imported goods enabled by complex supply chains. Imported goods with content produced by forced labor is a central problem. Active investors have a role.

Jin Zhang provides insights on changes in the global supply chain, long-term beneficiaries of the trade war, India’s growth prospects and Brazil’s path to reform.