Webinar summary:

How are tariffs affecting your portfolio companies?

Built a real-time tariff tracker to assess exposure across approximately 60 companies.
Each company’s financial model is stress-tested for tariff scenarios
Evaluated impact on operating profit before tax, excluding mitigations such as volume changes or sourcing shifts.
Companies with high margins or flexible supply chains are less affected.
Many holdings operate in sectors where tariffs have minimal direct impact such as services, software, and luxury.
The portfolio has outperformed during weeks of negative tariff headlines.

Would you sell a company due to tariff risk alone?

What’s driving underperformance in some holdings like TSMC, Novo Nordisk, or LVMH?

Taiwan Semiconductor (TSMC)
- Held since 2006 and remains a core holding.
- Recent decline driven by geopolitical tensions, not company fundamentals.
- Central to our thesis: no substitute exists for its semiconductor technology.
- Production capacity expanded in the US and Japan as a hedge.
Novo Nordisk
- Long-term leader in diabetes and obesity treatments.
- Exposure was trimmed in 2023 and 2024 following strong gains.
- Facing competitive pressure from Eli Lilly.
- Demand remains strong; current weighting in the global strategy is small.
LVMH
- Experiencing macro-driven luxury demand slowdown in China and the US.
- Brand fatigue noted at Louis Vuitton and Dior.
- Confidence remains in management’s ability to revitalize brands, as seen with Tiffany and Bulgari.

What’s working well in the portfolio?

AutoZone
- Demand driven by essential, failure-related parts for aging vehicles.
- High margins and low discretionary exposure.
CME Group
- Revenue benefits from trading spikes during market volatility.
- Covers contracts in interest rates, commodities, and equity derivatives.
TJX Companies
- Benefits from consumer downshifting during economic softness.
- Strong brand presence and limited exposure to China.
SAP
- Enterprise software provider with recurring revenue.
- Limited global supply chain risks.
Air Liquide
- Localized production model makes tariff impact negligible
- Stable cash flows supported by long-term take-or-pay contracts.
EssilorLuxottica
- Smart glasses collaboration with Meta is performing well.
- Global leader in lenses and frames.
- Myopia trends support long-term growth.

Are you tilting more international in light of US macro risks? What’s your view on Canada, and do you have Canadian exposure?

No top-down country allocation decisions are made.
Company selection is based on fundamentals regardless of listing country.
Current exposure limited to Canadian National Railway, added recently based on valuation.
Concerns about Canada’s stagnating income growth and policy environment.
Weak foreign direct investment and overly broad immigration policy noted as issues.
Canada retains long-term potential due to its resources, space, and education system
Policy shift toward business-friendly innovation needed.

Are you seeing new investment opportunities emerge?

Yes, maintain a watchlist of approximately 20 high-conviction companies.
One potential buy is close to being added.
Evaluating opportunities to rotate from defensive names to undervalued cyclicals.
Looking to capitalize on temporary market dislocations.

How do you manage risk through volatility?