Nvidia is AI gold-rush winner, and two ‘weatherproof’ stocks

TL;DR

James Thompson discusses his investment strategy, focusing on finding companies with star quality and growth potential while also maintaining a defensive buffer in the portfolio.

Transcript

hello and welcome to our latest Insider interview today in the studio I'm joined by James Thompson for manager of the RAF bone Global opportunities funds James great to see you today yeah thank you for having me so James you look for companies that have a certain Star Quality could you explain what your specific looking for and name some stock exam... Read More

Key Insights

• 🤩 Companies with star quality have unique attributes, significant market share, and ingrained presence in their industries.
• 👣 The fund differentiates itself through track record, honesty, integrity, and focusing on what they do well.
• 🛰️ NVIDIA, Microsoft, and Alphabet are poised to benefit from advancements in artificial intelligence.
• 👨‍💼 Allocating a portion of the portfolio to recession-resistant businesses provides a defensive buffer.
• 💄 Valuation should be balanced with growth potential and resilience when making investment decisions.
• 💇 Running winners and cutting losers is a mantra, but flexibility and adaptability are crucial to changing circumstances.
• 🥹 While there are companies they've held for a long time, eventual selling cannot be ruled out.

Questions & Answers

Q: What qualities do you look for in companies with star quality?

Thompson looks for companies that are doing something different, growing quickly but sustainably, and have a significant market share or ingrained presence in their respective industries. He values uniqueness, pricing power, and deep integration into the market.

Q: How does your fund stand out from other global equity funds?

Thompson highlights their track record of performance and stock-picking skills, which have been refined over 20 years. They also differentiate themselves by admitting areas they shouldn't invest in, such as emerging markets or certain sectors lacking high-quality growth credentials. Trust, honesty, and integrity are additional qualities they prioritize.

Q: Can you discuss the investment case for Nvidia, Microsoft, and Alphabet?

Nvidia is described as the picks and shovels for the AI gold rush, with significant growth potential as AI becomes more widely adopted. Microsoft benefits from its applications used for AI, particularly in partnership with OpenAI. Alphabet's core business of search, along with businesses like Waymo and YouTube, offer growth potential within the AI space.

Q: How much of the portfolio is allocated to recession-resistant companies?

Approximately 20% of the portfolio consists of defensive, weatherproof businesses. Examples include Rollins, a pest control business, and Waste Connections, a garbage collection company. These businesses provide essential services that remain in demand during difficult economic times.

Summary & Key Takeaways

• James Thompson looks for companies that are flying under the radar, with growth potential that is underappreciated by the market.

• He prefers mid and large-cap companies that can scale up their product or service sustainably.

• Thompson discusses two examples of companies with star quality: Rightmove, a UK-based property market leader, and Visa, a resilient and essential part of the credit and debit card network.