Both funds outperformed the benchmark for the year ending August and only slightly below for the month’s result.
Contemplating the current year, it's evident we're in an inexplicable economic situation not experienced before. Predictions by pundits are faltering even more than usual. No one truly knows if we are indeed facing a recession experience ahead, or if we face further inflation or even deflation.
Numerous threats loom large for investors. Firstly, the year-to-date average sea temperature for 2023 has surged 1.5°C above the norm, an extraordinary 4-sigma event. It's especially noteworthy as 2021 & 2022 marked the 2nd & 3rd hottest sea temperature records. Second, the Chinese economy has significantly slowed down counter to consensus expectations at the beginning of the year and faces large structural challenges. Third, the pace of disruption continues to accelerate. Instagram reached 100 million users in 2.5 years; TikTok achieved it in nine months; Chat GPT took just two months; and now, Threads has accomplished this feat in an astonishing five days. The list goes on.
Amidst this uncertainty, a question arises: Should we fret over the companies' outlooks in the portfolio? Our response remains firm: No because…… our process identifies resilient businesses, poised to thrive regardless of macro-circumstances. Recessions? They endure. Inflation or deflation? They persevere.
Our unwavering focus on the world's finest businesses assures us that our portfolios weather uncertainty adeptly and thrive in most macroeconomic settings. Our portfolio of highly profitable companies benefitting from global megatrends has low sensitivity to the vagaries of the economic cycle, whilst having long runways of growth to deliver sustainable profits. Stock prices follow profits over the longer term, with higher prices reflecting higher profits.
Net Zero Megatrend
The buildings sector, which includes energy used for constructing, heating, cooling and lighting homes and businesses, as well as the appliances and equipment installed in them, accounts for over one third of global energy consumption and emissions.
In the face of global population growth and urbanization, the world is undergoing an unprecedented building boom, akin to adding a New York City-sized urban area every month for the next 40 years. This means consumers are buying air conditioners and other appliances at unprecedented rates. HVAC systems are set to play a pivotal role. Heating and cooling contributes a staggering 15% of all greenhouse emissions. More stringent regulations regarding energy efficiency to lower emissions require more complex equipment. More complex equipment favours the large incumbent firms that are innovating and have the scale to invest in, install and service new technology. Insync have identified and invested in a global climate management innovator with a high return on capital that will benefit from the long runway of growth provided by the global drive towards net zero.
A Deep Dive! Each edition we highlight one quantitative feature of our fund produced by leading research firm Foresight Analytics.
This month we show Insync’s focus on Quality places us at the top of proper analysis over time. There are 3 measures that the industry uses to assess if a manager is to receive the ‘Quality’ style designation. Return on Invested Capital (ROIC) is one, and the major one for Insync sitting at the core of its stock selection process. The other two are Return on Equity and Forecast Return on Equity. Insync ranks highly on all 3.
Zero on the y-axis represents the average on these measures for the MSCI benchmark.
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