Our funds again posted positive returns in May. More importantly the funds have outperformed rolling 5-year returns (fund objectives) over the MSCI benchmark after fees. This underlines that Quality coupled with the proper time frame produces excellent results. Accepting some periods of under-performance over lesser periods is key to this success.
‘Quality’ means owning stocks delivering sustained earnings growth. Indeed during this period of economic volatility and tightening of capital supply, it is precisely these stocks that lead the way because of this crucial feature. They are far less reliant on prevailing macro settings in the economy than Value or Growth stocks. A factor in their most recent success has been their exposure to artificial intelligence (AI). Insync’s holdings across 16 global megatrends means we have multiple exposures to the rapid acceleration of AI adoption. But it is the fact that our holdings are some of the most profitable in the world, and with little to no debt on their balance sheets, is what separates our investment in technology from most peers.
Continuous negative macroeconomic and geopolitical commentary has resulted in many losing sight of the fact that something much more exciting, enduring and profound is going on. And it will continue to do so irrespective of these issues. Over-focusing on such Top Down factors can lure investors away from capturing significant enduring returns.
More than 30% of Insync’s portfolio is exposed to megatrends heavily driven by proven technology. We do this by investing directly into companies providing processes to manufacture AI chips (Picks & Shovels), to companies providing the large language models (LLM) and machine learning models (MLM), through to software and data analytics companies that are embedding these tools to accelerate their growth rates.
AI Revolution
Adobe has established itself as the indisputable standard in creative software. Commanding both recognition and reliance by professionals in graphic design, photography, videography, web design, and publishing. It is well positioned to benefit from AI.
Adobe has been leveraging its AI engine - Adobe Sensei, to power new AI features across its various product lines. Many of these new AI features, especially for Creative Cloud products, represent a potential paradigm shift in the day-to-day workflow and content creation of their users.
The realm of Generative AI has Adobe Firefly competing with current industry giants (DALL-E and Mid-Journey). Adobe however gains an edge utilizing licensed and out-of-copyright content, making it highly appealing to corporate markets. Large companies, constrained in content creation, can now profit from Generative AI, while trusting Adobe's reputation for reliability.
Source: Adobe.com
As the AI revolution unfolds Adobe stands as the unrivalled leader in content creation. It is already transforming the creative landscape and propelling content creators into limitless realms of possibility. Importantly it’s an extremely profitable business with compounding sustainable earnings. Precisely the kind of business Insync loves to own.
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