Tech to energy
“If you look at our portfolio two years ago, we were 15 per cent overweight in tech. Today we have less than 2.5 per cent investment in tech firms,” he added. “We are in the large, mega cap space. We also had de minimis exposure to energy markets and materials and now we are 25 per cent overweight in energy and 10 per cent overweight in materials. We have also increased our investment in healthcare,” he said. 

ExxonMobil Corp, for example, one of the largest oil companies in the world, has quietly become a truly high-quality growth stock over the past few years, he added.

“Oil has traditionally been a cyclical business but it has become less cyclical. Tech has become the new cyclical sector whereas energy and resources are less cyclical resulting from infrastructure investment required for transition to a low carbon economy,” he explained. “The ESG agenda and exclusionary approach to energy is actually a classic case of the law of unintended consequences. There is a massive infrastructure spend required to move to an electrified world if we are going to move away from fossil fuels. A new transmission grid needs to be built which is an energy-intensive process. By restricting the supply of energy, we have actually delayed the transition to a low carbon economy by decades. We all want to see a carbon neutral world but the exclusionary approach has taken us in the wrong direction,” he stressed.

“We now have under-supply and no demand constraints on energy and therefore we’re looking at a structural opportunity in these underinvested assets, like oil and iron ore. The free cash flow is very attractive to investors,” he added. "The transition to a low carbon economy will take time,” he said.

He also highlighted how businesses like Netflix over-earned because of the pandemic. PC shipments were up 50 per cent too in 2020/21 compared with the previous five years. But now in the post-Covid world, Netflix shares have tumbled. “There are industries that did very well in Covid but in the post-Covid world, those valuations don’t make sense,” he added.

“We also invest in consumer staples, rather than luxury goods. In an inflationary environment and when consumers are under pressure, they stick with what matters and what they can afford,” he explained.

Wrapping up, he said: “What makes GQG successful is our adaptability and our ability to find the earnings that are growing at reasonable prices and we are not constrained by style restrictions.”