global-equity-observer page
Global Equity Observer  •  Feb 27, 2024

Driving Quality 

Bruno Paulson, Alistair Corden-Lloyd
Compounding is a powerful force—but what tells us whether a company might be a high quality compounder? We focus on return on operating capital employed (ROOCE) and gross margins. Companies with high ROOCE typically have high-margin and asset-light operations, while high gross margins generally reflect pricing power. These attributes indicate to us which companies are worth looking at more closely, and where we ought to be spending our time evaluating franchise durability.

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global-equity-observer page
Global Equity Observer  •  Jan 29, 2024

“Nobody knows anything”… but the market thinks it does 

Bruno Paulson
After a year that suggested nobody knows anything, we’re entering 2024 with good arguments for both sunny optimists and cloudy pessimists. And while we can’t be certain where the world economy will land on the sunny/cloudy spectrum, the market is clearly pricing in a sunny outcome. Combined with high multiples, that creates an unfavourable asymmetry with limited upside and plenty of downside. The trick—as always—is to hold on to the healthy long-term absolute returns when markets take a knock.

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global-equity-observer page
Global Equity Observer  •  Dec 28, 2023

GLP-1: The Weight of Speculation 

Nic Sochovsky, Helena Miles
GLP-1 agonists have been heralded as game changers in treating obesity, with the drug manufacturers seen as the immediate market winners, and medtech and U.S. food & beverage stocks as losers. As they explain, the International Equity Team remains sanguine about the overall effects on their portfolios and believe that the medium- to long-term impacts are likely to be minimal.

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global-equity-observer page
Global Equity Observer  •  Nov 27, 2023

Executive pay: “Show me the incentive and I will show you the outcome” 

Bruno Paulson
As long-term investors, we want our companies’ pay plans to encourage longer-term thinking over short-term opportunism. We favour incentive schemes that align goals with shareholder interests, structured on sensible and disciplined performance-based targets. And we take the compensation process seriously, with our proprietary Pay X-Ray scoring system and established principles based on 20 years of talking to companies about executive pay.

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global-equity-observer page
Global Equity Observer  •  Oct 30, 2023

Walled Gardens: The Slow Burn AI Winners 

Bruno Paulson
Alongside the early winners of the AI gold rush, the International Equity Team believes there are others for whom the benefits of GenAI will take longer to emerge but will be significant over time. These “slow burners” will not only generate value from AI, but also have the pricing power to hang on to the resulting benefits. This challenge is easier in relatively closed systems, or “Walled Gardens,” that include proprietary data.

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global-equity-observer page
Global Equity Observer  •  Oct 06, 2023

Finding Diamonds in the Rough? Searching for Quality in Financials 

Isabelle Mast
Financials is a value sector – typically cheap and quite frequently not so cheerful. Or is it? We believe that select high quality companies within financials do exist and make excellent candidates for our portfolios. Well-managed companies with strong intangible assets in balance-sheet light subsectors such as exchanges, payments and insurance niches can achieve the combination of high returns, moderate cyclicality and recurring revenues that we favour.

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global-equity-observer page
Global Equity Observer  •  Aug 28, 2023

Good Things Come to Those Who Wait: An Argument for Long-term Thinking 

William Lock, Annabel Stanford
While society may be driven by immediate rewards, the International Equity team would argue that patience in investing leads to enduring results and positive long-term investment outcomes.

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global-equity-observer page
Global Equity Observer  •  Jul 31, 2023

Compounding Through the Hype 

Bruno Paulson, Emma Broderick
As artificial intelligence enters its next chapter, the early winners of the “AI gold rush” have been the semiconductor and cloud computing providers. But the surge in generative AI also included two surprises: the speed of consumer adoption and the lack of barriers to entry. While the full impact of AI remains unclear, the International Equity Team continues to invest through its high-quality lens, focusing on further opportunities in cost reduction and value creation, and with an eye on risks.

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global-equity-observer page
Global Equity Observer  •  Jun 29, 2023

To Buy or Not to Buy 

Marcus Watson and Richard Perrott
In the world of M&A, not all acquirers are equal. The International Equity Team is cautious of M&A, typically a high-risk choice for a company’s capital allocation. But there are companies out there—some of which they own—with a track record of relatively low-risk acquisitions that add meaningfully to shareholder returns. Good acquirers are a rare breed, but there are common characteristics to their strategies that suggest it is a repeatable process.

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global-equity-observer page
Global Equity Observer  •  May 31, 2023

Building Resilience with Quality Capital Allocation 

Alistair Corden-Lloyd
The resilience to navigate the sorts of global challenges we’ve seen over the last few years requires quality capital allocations. We’ve seen remarkable resilience in our holdings because the companies we look for exhibit deep, wide and well-managed economic moats that protect and grow market share, sustain or improve profitability, and potentially deliver attractive long-term returns. But maintaining those moats requires sustained investment in the unique attributes of the company’s offerings.

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global-equity-observer page
Global Equity Observer  •  May 08, 2023

Reckoning Deferred 

Bruno Paulson
The equity market looks complacent. In the face of continuing wage inflation, pessimistic bond market signals, tightening lending standards, low small business confidence, falling GDP forecasts and weakening consumer expectations—in short, a possible, even probable, U.S. recession—it continues trading on high multiples. This is a concern if you believe the economic reckoning was merely deferred rather than avoided.

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global-equity-observer page
Global Equity Observer  •  Mar 23, 2023

Diagnostics: The Workhorse of Improving Health Outcomes 

Helena Miles
What constitutes a valuable health care intervention? The International Equity Team believes that wider use of diagnostic testing and early screening can significantly improve patient outcomes and help optimize health care expenditure. For investors, diagnostics companies offer high returns on operating capital employed, underpinned by barriers to entry, recurring revenues and nondiscretionary end-market demand.

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global-equity-observer page
Global Equity Observer  •  Mar 01, 2023

Welcome to the Multi-Stage Life 

Emma Broderick, Jinny Hyun
Which companies are well placed to capitalize on the long-term behavioral and lifestyle changes that a multi-stage life might bring about? The International Equity Team discusses.

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global-equity-observer page
Global Equity Observer  •  Dec 23, 2022

When Money Isn't Free 

Anton Kryachok
As higher interest rates make it harder to engineer growth through debt, we think the relative value of businesses that can grow organically should only go up. Learn how our companies are better placed to use their balance sheet resilience to enhance their competitive positions, increase the sustainability of return on operating capital employed (ROOCE) and drive steady, predictable growth.

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global-equity-observer page
Global Equity Observer  •  Nov 29, 2022

The Power of Premium Pricing over Private Label 

Nic Sochovsky, Alistair Corden-Lloyd
In the current climate of rising prices and a global squeeze on the cost of living, do big brands face the risk of consumers “trading down”? The International Equity Team discusses why price perception matters, and the power of cues to influence decision making.

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global-equity-observer page
Global Equity Observer  •  May 18, 2022

One Step Forward, Two Steps Back 

Helena Miles
Massive strides have been made in the development and delivery of personalised medicine – but can it bolster the compounding potential of high quality companies? The International Equity Team’s Helena Miles investigates.

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global-equity-observer page
Global Equity Observer  •  Apr 25, 2022

Diversity – Asking Difficult Questions 

Bruno Paulson, Marte Borhaug, Alistair Corden-Llyod
Across the globe, stakeholders – including the International Equity Team – are pushing companies for greater transparency and accountability on Diversity, Equity & Inclusion. The team discusses.

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global-equity-observer page
Global Equity Observer  •  Aug 13, 2021

Back to Basics 

William Lock, Alistair Corden-Lloyd
In a world of daily financial chatter, it’s easy to get distracted from what drives the core of long-term returns; the power of compounding. William Lock and Alistair Corden-Lloyd explain.

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The International Equity team follows a disciplined investment process based on fundamental analysis and bottom-up stock selection. They believe that the best route to attractive long-term returns is through compounding and providing reduced downside participation.
 
 

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