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2026 Q1 Portfolio Perspectives1

by | May 5, 2026

Safety and Resiliency

One of the fascinating aspects of the investment management industry is how rapidly market narratives evolve. We entered the year with concerns about the disruptive forces of AI and signs of strain in the private credit market. Then overnight, war erupted in the Middle East and markets are now left to contemplate the potential longer-lasting shocks that may emerge from it such as higher energy prices, slower economic growth, inflation, and central banks needing to hike rather than cut interest rates. Bottom line, markets tend to suffer during periods of uncertainty, which is when quality matters more than ever in our opinion.

Rather than speculate about where we go from here, we will continue to invest in quality businesses that can successfully navigate periods of uncertainty. As each new event unfolds, we continuously revisit the thesis behind each of the portfolio’s holdings. At the same time, we are comforted by our overarching focus on owning high-quality companies, given a common set of characteristics that underpin them. This includes:

  • Above-average levels of profitability that will allow them to absorb unforeseen shocks in demand and/or operating costs.
  • Sustainable competitive advantages that set their business models apart from peers, especially in times of stress.
  • Credible medium-to-long-term growth plans.
  • Strong balance sheets that will allow them to continually reinvest back into their businesses despite a period of lower profitability and/or higher rates; and
  • Experienced management teams that can navigate an ever-changing environment.

Below are two detailed examples of portfolio holdings. We highlight their quality characteristics and explain why we believe they are well-positioned to weather—and ideally emerge stronger from—the uncertainties that may lay ahead:

Shin-Etsu Chemical (“Shin-Etsu”) is the world’s largest producer of polyvinyl chloride (PVC) and semiconductor silicon wafers, which together account for approximately 70% of group operating profits. Their silicon wafer franchise has performed well thanks to its leading-edge wafer mix and the strong demand for semiconductors today. Meanwhile, the PVC business was impacted by a cyclical downturn in North America. Cyclical downturns are a reality in a market like PVC, but Shin-Etsu is better positioned to navigate these challenges than peers, thanks to a diverse set of group revenues, financial strength (net cash position), and their positioning at the lower end of the PVC cost curve. Specifically, Shin-Etu’s largest PVC operations are in the U.S. (~75% of their production capacity), where it benefits from scale, access to inexpensive feedstock (such as U.S. shale gas), and highly automated production facilities.

Now, with the Middle East conflict unfolding, competitive dynamics have shifted even further in their favor. The war is causing disruptions in oil and petrochemical products from the Middle East, which disproportionately hurts their Asian competitors as the region is a net-importer of energy. Meanwhile, Shin-Etsu should benefit from rising PVC prices globally, which are already taking hold, and improved profitability on their U.S. exports.

Weir Group (“Weir”) designs, manufactures, and supplies products and engineering services for the mining industry. Weir’s customer value proposition centers around service and quality. Think better productivity, lower energy and water intensity and avoiding costly, unplanned downtime at mining sites. The company remains focused on growing its installed base of mining equipment to reap the benefits of the aftermarket sales that their original equipment generates over its lifespan. Today, aftermarket parts represent nearly 80% of Weir’s sales having grown at a 7% compound annual growth rate over the last decade. This high proportion of aftermarket sales, a diverse exposure to different underlying commodities and the propensity of its customers to operate through mining cycles (i.e., it is expensive to stop and start a mine) helps explain the overall attractiveness and resiliency of their business model. Considering the effects of the war in the Middle East, along with the tariff wars and even the explosive growth of AI, our conviction in Weir grows even stronger. All these forces point to increasing demand for metals, new mines, and more of their equipment and after-market spares.

Other portfolio holdings across different industries and geographies possess similar resilient qualities of a Shin-Etsu or Weir.

Company Leadership Resilience
Ryanair Largest European low cost airline
(Ireland/Industrials)		 Positioned to strengthen as peers weaken due to cost leadership, strong balance sheet, existing fuel hedges, and a history of capitalizing on crises.
Munich RE Largest global reinsurer
(Germany/Financials)		 Prudent loss reserving protects on the downside from unexpected shocks.
Air Liquide Global industrial gases leader
(France/Materials)		 Provides a continuous supply of critical gases primarily on medium-to-long term contracts make it defensive by nature.
Assa Abloy Largest manufacturer of locks and locking systems
(Sweden/Industrials)		 Two thirds of revenue comes from the replacement of existing products. Wide regional breadth and asset light.
Walmex Largest retailer in Mexico
(Mexico/Consumer Staples)		 Scale, a net cash balance sheet, and US parent contributions allow it to consistently reinvest to improve its price leadership.
Sandoz leading manufacturer of generic medicines and biosimilars
(Switzerland/Healthcare)		 Secular growth of generic drugs with rising loss of exclusivity across the industry. Not reliant on blockbusters.
Viscofan Global leader in artificial meat casings
(Spain/Consumer Staples)		 Strongest balance sheet in the industry allowing it to continuously reinvest ahead of peers. Casings are defensive when consumers trade down.
Macquarie Financial services and leader in infrastructure asset management
(Australia/Financials)		 High revenue and funding diversification and a proven ability to reinvent itself over time.
AIA Largest Pan-Asian Life and Health Insurer
(Hong Kong/Financials)		 Revenue is largely recurring premiums. Diversified across 18 different geographies and conservative reserving/underwriting.
TSMC Largest semiconductor foundry
(Taiwan/Information Technology)		 Strong balance sheet allowing it to continually invest in leading edge nodes throughout the cycle. Strong cash flows from mature nodes.

In uncertain times like these, we remain committed to staying disciplined and focused on quality. While our portfolio companies may experience share price volatility along with the broader market, we believe that over the medium term, their resilience will enable them to emerge stronger. This, in turn, should deliver outsized long-term performance for our clients.

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