Invesco Global Equity Income Q1 2025 – video update

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I would say

 

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that what we've seen since Trump

 

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has been elected is a game of two halves.

 

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Q4 last year was a strongly momentum driven market

 

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as investors got excited about deregulation and tax cuts

 

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reshoring and and ultimately, Trump's pro-growth narrative.

 

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What we've seen in Q1 is the exact opposite.

 

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Markets have drawn down sharply.

 

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Investors have dramatically reassessed

 

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the prospects for future growth.

 

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Consumer and business sentiment is really weakened.

 

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So it's been the total opposite of what we've seen in Q4.

 

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We are happy to see

 

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that the portfolio

 

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has proved relatively defensive through the drawdown.

 

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And suffice to say that we're seeing some good opportunities

 

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that have been stirred up in the market today.

 

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I think, as ever, we're bottom up stock pickers

 

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and we're delighted to see

 

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strong performance across a variety of sectors and geographies.

 

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I think one of the key themes in

 

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portfolios has been 

 

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a focus on those businesses that are able to swim against tides

 

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like tariffs and weakening economic sentiment.

 

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So we're delighted to see some of our more defensive companies,

 

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playing a role in the portfolio and returns thus far, year to date.

 

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Managing geopolitical risk

 

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when it can turn, on its head

 

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from one tweet to another or one day to the other

 

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is difficult,

 

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but what we're trying to do, as ever, is stick to the stocks.

 

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And we've we've done three key things in the portfolio today.

 

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The first is to reassess all of our investment cases

 

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to ensure that none of our companies are materially impacted,

 

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either competitively or from a cost perspective by these tariffs,

 

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so the last thing we want to do

 

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is expose ourselves to unnecessary risks.

 

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The second thing we've tried to do is find companies

 

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that may actually benefit from tariffs.

 

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So a good example of that in the portfolio

 

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today is something like 3i.

 

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3i’s biggest holding is the discount retailer called Action.

 

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Action’s competitors,

 

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I suppose not competitors directly but competitors for supply

 

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are companies

 

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like Amazon and Five Below in the US who've paused orders in China.

 

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This enables action to step into that vacuum

 

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and get some really good deals,

 

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which they can then pass on to consumers,

 

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through a better selection, higher quality products

 

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and lower prices.

 

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So it didn't make sense to us that that company had sold off

 

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so aggressively, since Valentine's Day this year.

 

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And that's a company

 

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that we're very excited about what they can do

 

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come rain or shine, going forward.

 

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The third thing we've done is try to find companies where we think

 

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the impact of tariffs is, overblown, and a good example

 

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of that in the portfolio today might be Canadian Pacific Railway.

 

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This is a railway that connects Canada

 

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through the US to Mexico.

 

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During Trump's, first presidency,

 

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this was a company that actually did very well beating the market.

 

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And we hope that may be what we see this time.

 

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One company that we're excited

 

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to have been able to buy at a discount is EWBC.

 

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East West Bank Corp is quite a niche bank.

 

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They serve, Chinese-Americans in largely in L.A.

 

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and one of the things they do that is very different

 

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to others is bank this community of immigrants.

 

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So if you are moving to the United States from China,

 

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then often you don't have the documentation required for,

 

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some of the other banks to make,

 

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an appropriately priced loan to you.

 

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EWBC are willing to take a more,

 

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tailor made approach for these often high

 

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net worth individuals

 

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so they will see, someone buying a multi-million dollar house,

 

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with a lot of cash,

 

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and take the view that they may not have the documentation,

 

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but the assets and,

 

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the cash flow generation to service that mortgage,

 

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are more than adequate.

 

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So this is a really nice niche bank,

 

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run by a fabulous operator in Dominic Inc.

 

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And we're excited

 

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to have been been able to buy that, single digit PE multiple.

 

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One of the key themes in the markets today and continues to be

 

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AI and I will paraphrase,

 

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Andy Jassy, the CEO of Amazon, in his recent shareholder letter

 

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where he he said something along the lines of,

 

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we're exceptionally excited about the future of AI.

 

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But the reality, the profit generation of that theme

 

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is going to take more than two years, but less than ten.

 

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And for us, as long term investors,

 

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that's something we're we're very,

 

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very happy to align ourselves with.

 

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And the recent selloff in AI related stocks like Broadcom,

 

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we think may well be an opportunity.

 

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So I think it would be fair to say that we're still excited

 

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about this potentially, world changing trend.

 

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AI but I think the 

 

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impact it's going to have on companies is more nuanced.

 

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So

 

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if we were to take DeepSeek, for example,

 

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the effect to summarise that that's hard

 

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is to lower the cost of inference.

 

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What that means

 

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is more companies can do more things with AI much more cheaply.

 

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That ultimately is a really good thing for AI adoption

 

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across all sorts of companies.

 

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So we remain as excited as ever about AI

 

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and now that some of the valuations of those companies

 

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that are plugged into that thematic have decreased,

 

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we're reassessing,

 

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where we should be placing our chips, no pun intended,

 

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going forward.

 

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I think I'd leave investors with a few things.

 

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Head of the team, Stephen Anness,

 

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began his career at the end of the.com crash.

 

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He's weathered the Great Financial Crisis. As a team

 

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we have weathered the European Debt Crisis.

 

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COVID, the 22 inflation scare.

 

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Markets do have

 

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periods of sharp, vicious drawdowns, and it's crucial to remain

 

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balanced and cool headed and also nimble

 

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to take advantage of opportunities

 

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that are thrown up during periods of market turmoil like this.

 

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We're going to stick to what we do best, which is bottom up

 

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stock picking,

 

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finding really robust and resilient cash flow generative companies

 

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that we can buy attractive prices run by management teams

 

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we trust to navigate these kind of choppy waters.

 

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We're going to make sure that we keep constructing our portfolios

 

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in a very balanced way.

 

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That's all weather,

 

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and so that whatever the economy and the markets throw at us,

 

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we can remain steadfast in our approach to buying good companies

 

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on sale, run by people we trust.