Stock Take: Part 3 (The International Brigade)

The Blind Squirrel's Mid-Year Position Review, 10th July 2024.

Welcome to Part 3 of the 🐿️’s mid-year theme and portfolio review. I think it is important to return and give a status update (and postmortems where necessary!) on some of the key themes that we have been investing in and writing about in the past 18 months.

In Part 1 we covered the ‘elephant in the room’ that is AI. We also updated our thoughts on agriculture, energy and uranium:

Stock Take: Part 1

In Part 2 we tackled our consumer-related exposures:

Stock Take: Part 2

In Part 3, pack your passports! We review the 🐿️’s existing and potential ex-US exposures (at least those not already covered this week).

The International Brigade

In a nod to the 🐿️’s current location and the surprise victory of left-wing parties in France last weekend, The International Brigade was the obvious title choice for Part 3 of our Stock Take series. George Orwell’s military skills shall not be discussed in this report.

It has been tough to write about international equity opportunities in recent years when arguably the only winning strategy has been to be overweight large cap US tech stocks and to ignore pretty much anything else!

Old fashioned concepts like (international) portfolio diversification are being scoffed at, but the outperformance numbers are hard to argue with. The Nasdaq 100 (QQQ 0.00%↑) has outperformed the MSCI EAFE (International ex US and Canada) by over 460% since 2010.

The AI party continues to grind on over the course of the summer rewarding the momentum traders - yes, it is momentum, the narratives are only formulated in order to justify the price action. As you know, the 🐿️ is generally much happier thinking about mean reversion ideas. But probably much poorer as a result!

It is not clear what catalyzes the reversal in the one-way traffic of foreign capital seeking out US assets. Anecdotal evidence suggests that Japanese savers still cannot get enough of the ‘Mag 7’ and we observed on Monday that a triple-levered Nvidia structured note is currently the most actively traded product on the London Stock Exchange.

I did note with interest how the Swiss National Bank appeared to be trying to ‘kick the habit’ of US tech stocks (after a multi-year addiction) when their 13F disclosures came out for Q1. Keep an eye out for their Q2 disclosures in mid-August. I expect more of the same.

SNB selling of US equities across the board but with a focus on large cap tech.

Even the greatest parties end at some point. I am sure that taking some time to focus on international equities that does not feel like judging some kind of elite ‘runners-up’ competition will soon bear fruit!

In Part 3 of our Stock Take series, we review our current acorn positions in UK, Mexican and Chinese equities. We also take a look at some of the country themes (India, Turkey and Morocco) that are still winking at the 🐿️ from the (long and short) watchlist.

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Some feedback below from happy readers that have already taken the leap.