Veteran subscribers will be familiar with the focus we have put on the types of companies David first referred to as Autonomies over four years ago. We came up with the designation in order to reflect the potential of truly global companies as some powerfully bullish factors converge.
Perhaps the most important of these is that governance is generally improving on a global basis. Some would argue the opposite with Russia deteriorating, ISIS running rampant in Iraq, Ebola posing a threat in West Africa and Europe still struggling with deflation. However that would be to miss the point that capitalism has gone global which is allowing more people than ever before to lift themselves out of poverty and into the middle classes. The major population centres of the world primarily in Asia and increasingly in Africa have abandoned the ideology of communism and billions of people are being provided with the tools, knowhow and infrastructure to multiply their productive capacity. This is a secular theme and the demand cycle this is unleashing represents a powerfully bullish force for equity markets over the long term.
The Technology, Healthcare and Energy sectors have the capacity to change how we live our lives. Innovation in any one of these has the potential to fuel a major bull market but right now we are presented with accelerating innovation in all three. This is important for two reasons. The first is that the world’s most advanced economies have potential to enhance their productive capacity. The second is that because capital is now global, these products, services, methods and skills can be disseminated rapidly so that more people than ever before can benefit. For emerging economies this represents a shortcut to development since they can sidestep a number of developmental stages as innovative solutions are embraced.
Energy deserves special mention because it touches each of our lives in a very real way every day. Unconventional oil and gas represent game changers for the Energy sector and are already delivering on lower Energy prices in real terms. One of the oldest adages from the commodity markets is that “the cure of high prices is high prices”. The high oil price environment ignited interest in developing new more efficient Energy sources. The entry of shale oil and gas is a partial solution. The application of Moore’s law to solar cell development has even more potential to displace fossil fuels and maintain a low Energy price structure. The evolution of nuclear technology shows similar promise.
These represent major themes and consumers are likely to be among the greatest beneficiaries. The companies providing new products and services will benefit but their customers will be benefit even more. This is one of the primary reasons we started looking at big multinational companies. What really sharpened our focus was the fact so many were breaking out to new all-time highs when the wider market was still getting off its knees. Truly global companies that dominate their respective niche have proven track records of generating brand loyalty, opening up new markets and they have the scale to achieve success whether others might flounder. Many of the Autonomies have strong balance sheets and have been around long enough to have lengthy records of dividend increases. However we did not make dividends a defining characteristic because that would exclude a significant number of the companies delivering the innovation upon which productivity growth potential relies.
I used the Autonomies in the latter half of Crowd Money to show base formation completion and as a template for how a number of themes can coalesce to drive a major bull market. A subscriber, Chris Moore at WM Capital Management in the UK, approached me last year at The Chart Seminar asking if there was a fund that he might invest in for his clients that represented these themes. There were some global funds and some dividend funds but none that we could describe as representing the Autonomies. He asked if I would like to start one and I concluded that it would be better to be part of the fund than have someone else do it so I agreed.
The fund will be equally weighted, rebalanced quarterly and will hold the 100 Autonomies with the most attractive chart patterns. Veteran subscribers will be familiar with our frequent commentary on the high costs of fund management so I made competitive fees a condition of my participation. The fund will have a management fee of 0.55%.
It will launch in March and I will be giving a talk at the East India Club on February 10th to talk about The Big Picture and the Autonomies from 6:30pm. If you would like to attend or would like some additional information relating to the Global Corporate Autonomy Fund please contact Chris Moore at [email protected]
Here is a link to the fund brochure: http://www.wmcapitalmanagement.com/images/The%20Global%20Autonomy%20Fund.pdf
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