During a speech that might best be described as exuberant, Elon Musk hailed Donald Trump’s return to the White House as “a fork in the road of human civilisation”. It has certainly helped keep investor curiosity alive, whatever our own ideals may be.
The prospect of an ‘America first’ agenda, trade tariffs, short-term inflation, fewer rate cuts and other twists and turns has prompted much talk of how to ‘Trump-proof’ a portfolio. On balance, this discussion is more than justified.
Yet it seems slightly unfair to suggest Trump alone should be at the centre of any ‘proofing’ efforts. For a start, his designs appear to be changing all the time, with plenty of U-turns – from immediate tariffs to a new deal instead.
Moreover, we could just as easily argue that portfolios need to be safeguarded against China’s ongoing woes, Europe’s painfully slow growth or the continuing fallout from the UK’s Autumn Budget. When you think about it, the list is lengthy.
Crucially, it is in many ways counterproductive to view these issues through a single political lens. Economic circumstances are what matter for investors – and right now, for all kinds of reasons, these are both uncertain and volatile.
There is no such thing, of course, as a business that can withstand every negative dynamic imaginable. But our chances of identifying an especially resilient company are likely to be enhanced if we acknowledge two points.
The first is that the investment universe is vast and varied. Contrary to some perceptions, it stretches far beyond the Magnificent Seven technology stocks that have dominated market returns of late.
The second is that fundamentals are usually the most important gauge of a company’s health and outlook. Whatever the bigger picture might be, a specific business’ own attributes are most likely to determine whether it will survive and thrive.
With these considerations in mind, below are three stocks that have performed well amid recent market wobbles. They are presented here not as recommendations but merely as examples of companies that have demonstrated an ability to rise above the continuing tumult.
The first company is Games Workshop, a genuine British success story. First floated on the London Stock Exchange in 1997, it has developed into a global phenomenon. It graduated to the FTSE 100 in December.
The company now generates almost 80% of its revenues overseas. It has even signed a TV-and-film deal with Amazon, which is likely to further expand knowledge of the brand.
Non-executive chairman John Brewis has highlighted the business’s lack of debt and its stated policy of paying shareholder dividends out of “truly surplus cash”. The total dividend payout for the current financial year has already exceeded last year’s.
Springer Nature, the British-German international publishing company created through a 2015 merger, is another resilient business. Its blue-chip publications include top multidisciplinary journal ‘Nature’ and popular magazine ‘Scientific American’.
Although its global office is in London, the business has been listed on the Frankfurt Stock Exchange since last October. The proceeds from its IPO are being used primarily to reduce the company’s debt.
Looking further ahead, Springer Nature intends to capitalise on the boom in artificial intelligence. Its CEO has outlined plans to invest in AI to “reduce friction in the academic community” and “accelerate solutions to the world’s biggest problems”.
Finally, alternative asset manager Pollen Street is one of many innovative companies within the FTSE SmallCap Index that we believe are capable of delivering long-term growth.
With offices in the UK and the US, the business specialises in private credit and private equity. It first listed two years ago and has since demonstrated solid cashflows and encouraging growth potential.
Pollen Street aims to help finance entrepreneurial companies focused on bringing about far-reaching, sustainable, positive change. This means it is closely aligned with megatrends such as the green transition.
So what do these three stocks have in common? Not a lot, as it happens. They differ significantly in terms of market value, history, sector, geography, listing and numerous other factors.
But this is actually the point. In seeking to proof a portfolio against the ripple effects of a Trump presidency or any other would-be source of disruption, it is necessary to look further afield and dig deeper.
In my experience, this requires in-depth research and direct engagement. Ultimately,
that is how active fund managers can attempt to spot the one thing that perhaps does unite these businesses: a capacity to endure, adapt, break new ground and keep growing.
Remember, too, that Trump may not be that bad for the stock market after all. He does tend to use it as a barometer of his own success – which is why this is very much a case of informed stock-picking in the short term and potential tailwinds for the medium and long term.
Sid Chand Lall is manager of the IFSL Marlborough Multi Cap Income fund. The views expressed above should not be taken as investment advice.