We are living in one of the most noteworthy periods of change in history. The internet and the digitization of nearly everything have created some massive new industries.
In the scientific space, the mapping of the human genome at the beginning of the century has yielded new ways of treating some of our most challenging diseases, including Covid-19.
Our philosophy is focused on durable structural change. We don’t follow cyclical trends, instead the central themes in our investment strategy are for the long-term. As we head into 2022, we are not looking to what excites us just for the year ahead, but what excites us over the next 3-5 years.
Alphabet, Facebook, Amazon, Mastercard and others in our Invesco Global Focus Equity Fund, are great companies with deep intellectual libraries and formidable network effects.
There is nothing temporal or fleeting about the size and scale of their advantage, these companies have created, or are operating within, economic ecosystems that have expanded structurally.
Perhaps the most important thing to understand about networks is that, once entrenched, they can only be displaced by the creation of an entirely new one. That’s a tough task. People are on Facebook, Google and Amazon because everyone else is, too.
Meanwhile, credit cards were the earliest iteration of digital payments. There are now a myriad of ways to send money to people to pay for things online or in a store. The use of these by consumers is only going to increase.
IT departments are planning to move much of their software from an on-premise platform to the cloud, facilitated by Amazon Web Services and Alphabet, along with other players in the world.
This is no small thing. It represents a huge shift in the IT stack that has a long way to go. Software in the cloud rids the enterprise of some of the big capital outlays and a lot of hardware that is costly to maintain. The best innovations, the ones that represent a structural shift, always deliver an outcome that is both better and cheaper.
As a part of the move to the cloud, cyber security in enterprises have undergone an overhaul. Instead of only having to secure a single premise, there are now a myriad of endpoints, and many things running in the cloud. This means a different toolkit is needed for network security.
That is a big evolving field that is growing in importance as networks get distributed and their workloads shift to the cloud. CrowdStrike has built the first fit-for-purpose cloud-based security software. It is not an adaptation of legacy on-premise software, it was designed to secure modern network endpoints, and modern threats and it is growing very rapidly.
The chart below shows that the growth of spending on security is significantly outpacing the growth of IT spending overall, a trend which should provide a continued tailwind for CrowdStrike in the years to come.
Source: Bloomberg Intelligence, IDC
Elsewhere, the mapping of the human genome completed around 20 years ago has created new opportunities for drug development and clinical research.
We are now seeing its impact, both in the method of drug development and clinical research. The development and manufacture of the Covid-19 vaccinations is a direct result of that. The virus was quickly genetically sequenced on an Illumina sequencing machine, enabling it to get to market fairly rapidly by customary standards. Normally, commercialising a medicine usually takes a few billion dollars and 10 to 20 years to come to fruition.
We are, however, in the early stages of this theme. We have chosen to invest in companies such as Illumina, diabetes giant Novo Nordisk and Thermo Fisher Scientific, a provider of a wide array of diagnostic and lab equipment sold to research labs, hospitals and the biotech and pharma industry. Each is the leading global player in their respective arenas with strong intellectual property rights and substantial long-term opportunity.
The market narrative in 2021 was all about the cycle, even though there are some profound changes happening all around us. The thing about cycles is that they are just that, they are passing, reflecting a temporal change in preference.
Structural change, of the sort we look for, is much bigger than that. It doesn’t separate the world into cyclical or defensive, it separates it into winners and losers, and the losers fade into obscurity.
The portfolio we hold today was not assembled to perform only in a tailored environment. What drives our holdings isn’t complicated. Their growth rates and economic profitability have been going up together. The market is what it is, but we are invested in a portfolio of 35 businesses, with each holding a significant competitive edge in an expanding economic ecosystem.
Many pieces we read from the ‘outlook’ genre touch on subjects that keep the writer up at night, or challenges they expect in the year to come. The truth is, for us, there’s not a lot that scares us as we head into 2022 or the years that follow.
While negative headlines may drive a few bad weeks or a few bad months for your equity portfolio, they shouldn’t scare you as a long-term investor. In fact, negative headlines often create the temporary pullbacks in stock prices that can set you up for fantastic long-term returns in the years ahead.
In our years, we’ve seen all manner of inflationary scares, geopolitical tensions, terrorist attacks, currency crises and the like, but none of them have mattered to generating long-term returns for our clients.
As those that follow our strategy may recall, what we think matters most is buying durably advantaged companies at the right price, run by management teams we can trust to do the right thing with shareholders’ money. If we can find opportunities like that and invest in them with conviction, good outcomes will follow over a 3-5 year investment horizon. The rest is just noise.
John Surplice, Head of EMEA Equities & Co-Head of European Equities, discusses the 2024 performance and 2025 projections for European equities in a detailed conversation with Product Director, Georgina Miller.
The 2025 equities outlook is improving. Balance sheets look healthy, and many stocks are attractively valued, though geopolitical risks remain. Find out more.
Markets were relatively volatile during the quarter, with investors being pulled between the negatives of geopolitics and weaker industrial demand, and the potential benefit of lower interest rates.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
The fund may invest in certain securities listed in China which can involve significant regulatory constraints that may affect the liquidity and/or the investment performance of the fund.
The fund invests in a limited number of holdings and is less diversified. This may result in large fluctuations in the value of the fund.
This marketing communication is exclusively for use by Professional Clients and Financial Advisers in Continental Europe (as defined below), Qualified Clients/Sophisticated Investors in Israel and Professional Clients in Jersey, Guernsey, Isle of Man and the UK.
By accepting this marketing communication, you consent to communicate with us in English, unless you inform us otherwise.
Data as at 31.10.2021, unless otherwise stated.
This is marketing material and not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.
For more information on our funds and the relevant risks, please refer to the share class-specific Key Investor Information Documents (available in local language), the Annual or Interim Reports, the Prospectus, and constituent documents, available from www.invesco.eu. A summary of investor rights is available in English from www.invescomanagementcompany.lu. The management company may terminate marketing arrangements. This is not an invitation to subscribe for shares in the fund and is by way of information only, it should not be considered financial advice. This does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such an offer or solicitation. Persons interested in acquiring the fund should inform themselves as to (i) the legal requirements in the countries of their nationality, residence, ordinary residence or domicile; (ii) any foreign exchange controls and (iii) any relevant tax consequences. As with all investments, there are associated risks. This communication is by way of information only. Asset management services are provided by Invesco in accordance with appropriate local legislation and regulations. The fund is available only in jurisdictions where its promotion and sale is permitted. Not all share classes of this fund may be available for public sale in all jurisdictions and not all share classes are the same nor do they necessarily suit every investor. Fee structure and minimum investment levels may vary dependent on share class chosen. Please check the most recent version of the fund prospectus in relation to the criteria for the individual share classes and contact your local Invesco office for full details of the fund registration status in your jurisdiction. Please be advised that the information provided in this communication is referring to Invesco Global Focus Equity Fund Class A (accumulation - USD) exclusively. This fund is domiciled in Luxembourg.
For the distribution of this communication, Continental Europe is defined as Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden and Switzerland
Issued by Invesco Management S.A., President Building, 37A Avenue JF Kennedy, L-1855 Luxembourg, regulated by the Commission de Surveillance du Secteur Financier, Luxembourg.
Denmark: The fund is registered in Denmark for professional investors only and not for public distribution. Guernsey: The fund can only be promoted to Professional Clients. Isle of Man: The fund is an unregulated scheme that cannot be promoted to retail clients in the Isle of Man. The participants in the scheme will not be protected by any statutory compensation scheme. Israel: Issued by Invesco Asset Management Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority. No action has been taken or will be taken in Israel that would permit a public offering of the Fund or distribution of this communication to the public in Israel. This Fund has not been approved by the Israel Securities Authority (the ISA). Accordingly, the Fund shall only be sold in Israel to an investor of the type listed in the First Schedule to the Israeli Securities Law, 1968, which has confirmed in writing that it falls within one of the categories listed therein (accompanied by external confirmation where this is required under ISA guidelines), that it is aware of the implications of being considered such an investor and consents thereto, and further that the Fund is being purchased for its own account and not for the purpose of re-sale or distribution. This communication may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have been sent. Nothing in this communication should be considered investment advice or investment marketing as defined in the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 1995 (“the Investment Advice Law”). Investors are encouraged to seek competent investment advice from a locally licensed investment advisor prior to making any investment. Neither Invesco Ltd. Nor its subsidiaries are licensed under the Investment Advice Law, nor does it carry the insurance as required of a licensee thereunder. This communication does not constitute an offer to sell or solicitation of an offer to buy any securities or fund units other than the fund offered hereby, nor does it constitute an offer to sell to or solicitation of an offer to buy from any person or persons in any state or other jurisdiction in which such offer or solicitation would be unlawful, or in which the person making such offer or solicitation is not qualified to do so, or to a person or persons to whom it is unlawful to make such offer or solicitation. Switzerland: This communication is issued in Switzerland by Invesco Asset Management (Schweiz) AG, Talacker 34, CH-8001 Zurich, who acts as a representative for the funds distributed in Switzerland. Paying agent for the fund distributed in Switzerland: BNP PARIBAS SECURITIES SERVICES, Paris, succursale de Zurich, Selnaustrasse 16, CH-8002 Zürich. Jersey: Consent under the Control of Borrowing (Jersey) Order 1958 (the "COBO Order") has not been obtained for the circulation of this communication. The offer that is the subject of this communication may only be made in Jersey where it is valid in the United Kingdom.
