e-fundresearch.com: What are your personal lessons learned from year-to-date market developments?
Alexander Farman-Farmaian: Year-to-date the S&P 500 Index has appreciated roughly in line with the expected growth of the profits of the companies that comprise the Index. Therefore the learnings of this year are that if one invests in a company with consistent and strong profit growth, then over time, the stock price will appreciate to reflect those earnings expansion.
e-fundresearch.com: To what extent has your strategy been able to benefit from this year's market environment and which particular investment themes have delivered the strongest performance contribution on a year-to-date perspective?
Alexander Farman-Farmaian: So far this year, the companies in our client portfolio who had the strongest profit growth also saw a similar jump in stock appreciation. The theme that helped us this year and contributed to our long-term outperformance was that we continued to focus on owning the shares of companies whose profits grew the fastest. Luckily their valuations remain reasonable as stock price appreciation has mirrored their profit expansion.
e-fundresearch.com: With regards to the coming year: How optimistic is your view into the future and what obstacles and challenges should investors be prepared to overcome in 2018?
Alexander Farman-Farmaian: We are optimistic for the upcoming year 2018, as we see US economic activity currently accelerating and that will likely be magnified in terms of US company profits, as the US Dollar has fallen substantially this year, thereby making international profits of our global companies get translated in to more dollars. Next year, 2018, we could see a reverse of the US Dollar fall, and if it appreciates as the Federal Reserve raises interest rates to offset the strong economic growth, then Non-US Investors will likely see not only strong US corporate profit expansion and its impact to stock prices, but also will see the benefit of a magnified appreciation in the value of their US Dollar equity and asset holdings.
e-fundresearch.com: Why should investors consider an increase in allocation to your asset class and in particular your strategy in 2018?
Alexander Farman-Farmaian: Investors should note that the companies in the portfolio that we have researched and chosen for them are amongst the fastest growing, most dominant global franchises, led by some of the best management teams with a long track-record of delivering superior, above-average growth results. Over time, shareholders and investors will be the beneficiaries of this focus and dominance over many other companies that will find it difficult to compete against them. That is how money is made in owning an excellent private company such as Red Bull or Glock, and that is how we manage our portfolios – finding excellent and special businesses, managed by great and focussed managements, and buy shares in those companies at reasonable prices… and then to be patient and let the businesses make one wealthier over time and the long-term.
