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January 2024 Monthly Update

Updated: Feb 25

A strong positive start to the new calendar year for our funds culminating at just under 30% for the past year. Since 2017 they outperformed 6 out of 7 calendar years (see table further on) demonstrating that Insync’s disciplined data driven investment process delivers strong and consistent performance. We also continue to meet fund objectives over their 5 years rolling time frames after fees as well.


Fervent discussions surrounding the ‘Magnificent 7’ stocks has polarized investors. Some view them as a bubble whilst others ride their remarkable momentum. This divide has led to a search for fund managers who either avoid or embrace these high-flyers, driven by their substantial investments into AI, propelling the stock prices of six of them. These businesses are not just market leaders without substance as many assume. They boast some of the highest earnings growth rates and returns on invested capital (ROIC) in markets. For those worried that so few stocks have been the fuel behind market rises, this is actually the norm over the past hundred years.


We adopt a disciplined, data-driven approach prioritizing valuations especially in hyped market segments. Our investment calls are not swayed by mere momentum or contrarian impulses. Currently, our portfolio includes only two of the ‘Magnificent 7’ (with Meta among our top 10 active weights). Our methodology transcends superficial analysis, ensuring that our investments in these stocks are based on solid financial performance and long-term value, rather than fleeting market trends and populist headlines.


Investing into the AI sector presents challenges. Elevated valuations strain investor expectations amid soaring price-to-sales and price-to-earnings ratios. Concurrently, industry leaders such as Nvidia encounter capacity constraints, despite burgeoning demand for AI technologies until additional capacity comes on-line. Evolving regulatory landscapes introduce uncertainty, potentially reshaping market dynamics and competitive edges. Geopolitical tensions further complicate things risking supply chain disruptions and IP issues. Lastly, fierce competition and potential market saturation threaten growth trajectories and profitability of AI firms. Active stock-picking is required to navigate these issues and the risks to generate strong returns as there is no doubt that the market for AI will grow significantly.

Both Funds outperformed!

Pet Humaisationisation Megatrend

 

Our Pet Megatrend has for s everal years delivered strong results with current insights pointing towards further significant long-term expansion opportunities for a select few. Its burgeoning growth is predominantly propelled by Gen-Z & Millennials whose incomes are on the ascent marking them as pivotal segments for the sector's future. The allure of pet ownership transcends mere companionship; it extends into lifestyle preferences and the pursuit of enhanced mental and physical well-being.

 

The pet sector's economic impact is undeniable, serving as a testament to the deep bond between humans and their animal counterparts. Pets, are increasingly seen as integral members of the family

driving a noticeable uplift in pet-centric expenditure. This upward spending trajectory is particularly remarkable outpacing growth in other areas of personal spending and income, even in economic downturns. It’s not confined to any single region either, rather a global phenomenon. Projections indicating significant rises in pet ownership are occurring in key markets such as China driven largely by younger generations.

 

Zoetis is well-positioned to capitalize on these trends as the world's largest producer of medicine for pets and livestock. Their products predict, prevent, detect, and treat animal ailments. This company meets our strict  hurdles of high profitability based on ROIC and generates prodigious amounts of cash. Importantly it has a long runway of growth to deliver sustained earnings growth.


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