In this episode, Peter Lampert, lead portfolio manager of the International Equity Strategy, provides insights on the team’s investment process, the state of the portfolio, and the main drivers that are currently having an outsized impact on performance, namely, semiconductors, obesity medicines, and defense companies. He details his team’s rigorous approach to evaluating management teams from both a quantitative and qualitative standpoint, providing an in-depth example of Hitachi. The conversation concludes with a brief discussion of the current macro environment.

Key Takeaways:

• As enthusiasm surrounding artificial intelligence continues to grow, semiconductor companies have strong competitive advantages and dominant market share in their niche industries.
• According to the team’s DCF model, the long-term growth rates of companies like TSCM have increased, so they have trimmed back some positions to manage risks.
• With Novo Nordisk leading the way, the growing market for obesity drugs is expected to become the largest therapeutic drug class as more and more companies look to enter the space.
• Amid ongoing geopolitical conflicts, there is a strong long-term investment case for select European defense companies, as European governments increase defense spending to protect Western values.
• Regarding areas of opportunity, Peter highlighted the theme of improved corporate governance in Japan as companies in the country aim to meet global standards.
• When evaluating a company’s management team from a qualitative perspective, there are four defining elements: Strategy, operational excellence, capital allocation, and trustworthiness.

Host: Rob Campbell, CFA, Mawer Institutional Portfolio Manager
Guest: Peter Lampert, CFA, Mawer Portfolio Manager

This episode is available for download anywhere you get your podcasts.

Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore.

Visit Mawer at https://www.mawer.com.

Follow us on social:

LinkedIn - https://www.linkedin.com/company/mawer-investment-management/

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In this episode, Grayson Witcher, the lead manager of the U.S. Equity Strategy, discusses the key drivers currently impacting the U.S. economy, including inflation, interest rates, artificial intelligence, and the upcoming presidential election. He emphasizes the importance of diversification and avoiding sharp edges—particularly during an election year. Grayson outlines the importance of and reasoning for his team’s practice of monitoring company management changes in real-time and the value of investing in companies with strong leadership.

Key Takeaways:

• The three big themes driving the U.S. market over the past six months are interest rates and inflation, artificial intelligence, and the election.
• While food, energy, and goods inflation has fallen, service inflation is proving to be a bit stickier, as it entails things like car insurance, rent, and medical services. Wage inflation has also remained relatively strong.
• With artificial intelligence, there is no denying the initial hype and surrounding success of the excitement for companies like NVIDIA. However, the question remains as to whether the trend will continue or start to fizzle out, similar to other technology trends from the 90s and 2000s.
• Regarding the upcoming U.S. election, both candidates’ agendas could impact the economy in inflationary ways, though the impacts would differ depending on the prevailing candidate.
• For Grayson, his election strategy for the portfolio is to prepare, not predict. He avoids sharp edges, which are the industries and companies that are highly dependent on one outcome, and leans into diversification.
• Within the U.S. portfolio, there are two main ways the team diversifies the single-country portfolio: diversification by geography and by industry or sub-industry.
• For long-term investors, management and culture drive a significant amount of value because they reinvest the cash flows generated by these businesses, and they are responsible for managing risk.

Host: Andrew Johnson, CFA, Mawer Institutional Portfolio Manager
Guest: Grayson Witcher, CFA, AB, Mawer Portfolio Manager

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/the-u-s-equity-landscape-inflation-artificial-intelligence-and-elections-ep166

This episode is available for download anywhere you get your podcasts.
--
Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at www.mawer.com.

Visit Mawer at https://www.mawer.com

Follow us on social:

LinkedIn - https://www.linkedin.com/company/mawer-investment-

management/ Instagram - https://www.instagram.com/mawerinvestmentmanagement/

Twitter - https://www.twitter.com/Mawer_Invest

In this episode of the podcast, credit analyst Curtis Elkington provides a comprehensive overview of the $50 trillion global commercial real estate market. He covers the current headwinds facing various property sectors, such as pandemic-induced challenges in the office sector and touches on the surprising resilience of the retail segment. Elkington sheds light on the complexities of the commercial mortgage-backed securities market and details the credit analysis process his team uses to evaluate potential investments with examples.

Key points from this episode:

• Over the past four years, commercial real estate as an asset class has faced potentially the most significant of headwinds, most notably the pandemic and the rise in interest rates.
• While the pandemic had a different impact on each property sector within commercial real estate, higher rates had a much more uniform impact across the various industries.
• The overall size of the commercial real estate market, which includes multifamily, office, retail, and industrial properties, is massive. In 2023, Savills estimated the total global property value was $50 trillion, of which the U.S. is the largest component.
• Vacancy and capitalization rates are the two primary metrics used to assess the health of the commercial real estate sectors. In office, both vacancy and capitalization rates have increased significantly since 2019.
• According to the St. Louis Federal Reserve, the 25 largest commercial banks have ~$860 billion in commercial real estate loans, which is only 6% of their collective assets. All the other banks outside of the top 25 have $2 trillion in commercial real estate loans, but that accounts for 30% of their total assets.
• Over the past six months, the risk-reward on the credit side for several real estate companies was unattractive in all scenarios.
• Some market participants believe that upwards of $100 billion, or 15%, of U.S. CMBS is currently mis-rated.
• The credit team does two main things in its intensive analysis credit review. They assign a Mawer credit rating that's tied to valuation, and they establish a margin of safety that's tied to downside production.
• With commercial real estate, just like any potential investment, the team reviews each issue and issuer on a case-by-case basis following a thorough and rigorous process before committing investor capital.

Host: Rob Campbell, CFA, Mawer Institutional Portfolio Manager Guests: Curtis Elkington, CFA, Mawer Credit Analyst

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/skyscrapers-and-storefronts-insights-on-the-commercial-real-estate-market-in-2024-ep165

This episode is available for download anywhere you get your podcasts.

Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore.

Visit Mawer at https://www.mawer.com.

Follow us on social:

LinkedIn - https://www.linkedin.com/company/mawer-investment-management/

Instagram - https://www.instagram.com/mawerinvestmentmanagement/

In this episode, Crista Caughlin, lead Portfolio Manager of the Canadian Bond Strategy, and Brian Carney, lead Portfolio Manager of the Global Credit Opportunities Strategy, provide their thoughts on recent economic data releases, a shift in central bank language, and recent market volatility. They delve into new issuance activity in the U.S. and Canada, widening spreads in the investment-grade and high-yield markets, and current portfolio positioning. The conversation concludes with an update on the growth and expansion of Mawer’s fixed income team.

Key points from this episode:

• Central banks have shifted their focus from solely targeting inflation to balancing inflation and growth risks, leading to the start of a global easing cycle.
• Recession fears have increased due to weakening economic data, such as falling PMIs, rising unemployment, and weak growth, causing volatility in markets.
• It remains to be seen if recent volatility is just a pocket or something more material. If growth remains robust, it's likely just a pocket that will right-size itself. If growth continues to weaken and signs of a U.S. recession continue to pick up, it could be a larger downturn.
• The first half of the year has been smooth sailing for credit investors, but recent dislocations and changes resulted in significant widening in credit spreads.
• New issuance activity has been robust in the U.S. and Canada, with the levels of investment grade and high-yield issuance year-to-date already exceeding last year’s volumes.
• Commercial real estate has been a topical sector, but neither the Canadian bond strategy nor the global credit strategy have any direct exposure to real estate.
• In terms of where yield curves are today, parts of the curves are still inverted, particularly recession indicators.
• Both strategies hold Verizon Communications and Ford Credit Canada due to their favorable financial and operating metrics.

Host: Kevin Minas, Mawer Institutional Portfolio Manager
Guests: Brian Carney, Mawer Portfolio Manager, Crista Caughlin, Mawer Portfolio Manager

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/navigating-the-canadian-equity-landscape-dispersion-energy-transition-and-opportunities-ep163

This episode is available for download anywhere you get your podcasts.
--
Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at www.mawer.com.

Follow us on social:

LinkedIn - https://www.linkedin.com/company/mawer-investment-management/

Instagram - https://www.instagram.com/mawerinvestmentmanagement/

In this episode of the podcast, Mark Rutherford, Co-Manager of the Canadian large-cap equity strategy, discusses the current investment landscape in Canada, highlighting the wide dispersion in sector performance and the impact of central bank policies. He delves into the long-term theme of the global energy transition and its far-reaching effects on various market sectors in Canada. Insights into insurance and banking sector performance are provided, as well as examples of specific portfolio holdings within the Canadian equity strategy.

Key points from this episode:

• On the surface, healthy and attractive returns can be found across equity markets in Canada. However, there is quite a bit of dispersion under the surface.
• Year to date, top-performing sectors include energy and materials – which have been the top performers for a few years now – while telecoms, real estate, and some utility stocks are lagging the market.
• One longer-term theme that is top of mind, both for Canada and numerous countries around the world, is the ongoing energy transition.
• Long-term opportunities that Canada is well positioned for include energy production, natural resources and renewables, critical minerals, and utilities.
• AI has been a big driver of incremental change within the utilities sector. Companies like Fortis, Hydro One, and AltaGas are investing more every year and building up the rate base, which ultimately will grow their earnings over time.
• One simple heuristic Mark’s team uses when evaluating portfolio construction and portfolio holdings is to ask where they see headwinds and where they see tailwinds.
• Life insurance companies have benefited from higher interest rates and improved earnings mix, while banks are facing challenges due to slowing loan demand and higher provisions for loan losses.

Host: Andrew Johnson, CFA, Institutional Portfolio Manager
Guest: Mark Rutherford, CFA, Portfolio Manager

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/navigating-the-canadian-equity-landscape-dispersion-energy-transition-and-opportunities-ep163

This episode is available for download anywhere you get your podcasts.
--
Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at www.mawer.com.

Follow us on social:

LinkedIn - https://www.linkedin.com/company/mawer-investment-management/

Instagram - https://www.instagram.com/mawerinvestmentmanagement/

Twitter - https://www.twitter.com/Mawer_Invest

In this episode, Portfolio Manager Manar Hassan-Agha discusses how the Global Equity Team navigates an exuberant market environment while staying true to Mawer’s disciplined investment approach. He delves into the potential impacts of emerging trends, namely artificial intelligence (AI), and provides examples of the team’s measured approach to evaluating the hype and sustainability of these trends. He emphasizes the value of temperament, alignment, and identifying mispriced high-quality companies.

Key points from this episode:

• When considering potential errors of omission, it's a delicate balance between learning and improving while also ensuring you're not learning the wrong things. It's a matrix of good-bad decisions and good-bad outcomes.
• A deep dive on XP
• A deep dive on Robert Half
• We tend to overestimate the effects of new technology in the short term but underestimate them in the long run [Roy Amara], which could potentially apply to the current AI hype.
• The asymmetry today, in our mind, around AI hype is that there's a lot of uncertainty around this, particularly with respect to what's embedded in the prices of stocks. The difficulty continues to be identifying losers versus winners in a longer-term perspective.
• Chasing a theme is very difficult. You must be right on the theme and right on the securities in that theme while also not overpaying relative to the expectations already priced into the theme.

Host: Rob Campbell, CFA, Institutional Portfolio Manager

Guest: Manar Hassan-Agha, CFA, Portfolio Manager

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/marbles-and-billiards-navigating-the-highs-and-lows-in-global-equity-ep162

This episode is available for download anywhere you get your podcasts.

Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com.

Follow us on social:

LinkedIn - https://www.linkedin.com/company/mawer-investment-management/

Instagram - https://www.instagram.com/mawerinvestmentmanagement/

Twitter - https://www.twitter.com/mawer_Invest

Portfolio Manager Crista Caughlin discusses the economy and factors that drove markets in the second quarter of 2024.

Key points from this episode:

• Because inflation is easing at a gradual pace, central banks with likely be cutting rates gradually.
• We are at the end of a global tightening cycle and starting to see countries tweak their policies to better fit their domestic markets, but there is not and likely won’t be, a material divergence in the path forward among central banks.
• The yield curve has been inverted for almost two years, which is longer than average. However, it's not the longest inversion on record. In the late 80s, the yield curve remained inverted for over two and a half years before a recession.
• In continuation of the first quarter, equity markets did quite well again, with most reaching new highs during the quarter. The strength was primarily driven by a narrow segment of the market, notably technology.
  
  

Host: Kevin Minas, CFA, MBA, CAIA, Institutional Portfolio Manager
Guest: Crista Caughlin, CFA, Portfolio Manager

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/quarterly-update-q2-2024

This episode is available for download anywhere you get your podcasts.

Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com.

Follow us on social:

LinkedIn - https://www.linkedin.com/company/mawer-investment-management/

Instagram - https://www.instagram.com/mawerinvestmentmanagement/

Twitter - https://www.twitter.com/mawer_Invest

In this episode, Portfolio Manager Jeff Mo makes the case for investing in U.S. mid-cap equities, highlighting the country’s strong business environment, large domestic market, and GDP growth. He discusses current market trends, including artificial intelligence, and his team’s risk management evaluation, especially with a pivotal U.S. election looming on the horizon.

Key points from this episode:

• The U.S. is an attractive market for investing due to its strong rule of law, business environment, and large domestic market.
• Mid-caps are an investing sweet spot. While smaller companies struggle to gain competitive advantages, mid-caps have similar competitive advantages as large caps but with much more attractive growth profiles.
• There is one dominant theme right now in the market, which is artificial intelligence and anything related to that, all the way down to companies that are building HVAC systems for data centers.
• With risks like elections, the team goes through the portfolio company by company to evaluate potential changes as a result of an administration change.
• In thinking through the risks as part of their ongoing risk management exercise, the portfolio appears resilient, prepared, and diversified for many different scenarios, including different election outcomes.

Host: Rob Campbell, CFA, Institutional Portfolio Manager
Guest: Jeff Mo, CFA, Portfolio Manager

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/navigating-the-u-s-mid-cap-landscape-resilience-amid-uncertainty-ep160

This episode is available for download anywhere you get your podcasts.

Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com.

Follow us on social:

LinkedIn - https://www.linkedin.com/company/mawer-investment-management/

Instagram - https://www.instagram.com/mawerinvestmentmanagement/

Twitter - https://www.twitter.com/mawer_Invest