The ‘great rotation’ in stock markets since the US Fed started raising rates at the end of 2021 has favoured many great technology companies. However, the rotation has left behind many other companies that have high quality and offer great upside as well.
We have invested in several great technology companies, including Amazon, Alphabet, Nvidia and ASML, which have helped our World Stars Global Equities Fund to perform strongly. We continue to hold these companies but we also expect stock markets to broaden from their narrow focus on the Magnificent Seven, some of which we think are less magnificent than others.
The first quarter of this year saw the broadening accelerate as investors have become more selective and the reality of company fundamentals has prevailed over sentiment and hype. The demand for increasing capacity, artificial intelligence and other applications will be important drivers of growth and productivity for the global economy and our companies. So too, will increased healthcare spending and support of an ageing population, the renewal of the public and private asset base just about everywhere in the world, and the need to address challenges like global warming, energy transition, carbon reduction and water supplies.
We have positions in consumer, healthcare and industrial companies trading at valuations that are at multi-year lows, in absolute terms and relative both to the market and to their long-term trading ranges. It’s time to look beyond the Magnificent Seven.
