A Message from Mike

Markets Refocus on Fundamentals

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Over the last few months, we’ve spoken a lot about volatility, geopolitical uncertainty, and the way markets were being pulled around by headlines rather than fundamentals. In previous editions, I discussed how periods of uncertainty often create disconnects between market sentiment and the underlying quality of businesses. What has been interesting over the past four to six weeks is how quickly that narrative has shifted.

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Markets have moved back to earnings.

After a volatile start to the year, particularly across technology and growth sectors, investors are once again rewarding companies that continue to execute, grow earnings, and demonstrate long-term structural advantages. In many ways,

this is exactly the type of environment we want to see as long-term investors. Short-term fear creates opportunities, but eventually fundamentals reassert themselves.

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The rebound across technology has been particularly notable.

Only a few months ago, the market narrative was dominated by concerns around valuations, interest rates, and whether the AI trade had moved too far too quickly. While those concerns haven’t disappeared entirely, recent earnings season has reminded investors why many of these companies continue to command premium valuations in the first place.

The reality is that the largest technology businesses in the world are still growing at extraordinary rates, generating enormous free cash flow, and investing heavily into what increasingly looks like the next major infrastructure cycle: artificial intelligence.

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One company that stood out this earnings season was AMD.

For years, Nvidia has understandably captured most of the attention in the AI space, but AMD’s latest results reinforced something we have been discussing internally for some time — the AI buildout is broadening. This is no longer a one-company story.

AMD delivered exceptionally strong data centre growth, continued margin improvement, and importantly, very confident forward guidance despite ongoing macro uncertainty. What impressed me most wasn’t just the headline numbers, but the commentary around customer demand. The world’s largest cloud providers and enterprise businesses are still investing aggressively in AI infrastructure, despite higher interest rates and broader economic uncertainty.

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That tells us something important.

AI is increasingly being treated less like a discretionary technology upgrade and more like essential infrastructure. Whether it’s semiconductors, cybersecurity, cloud computing, networking, or power infrastructure, companies are racing to position themselves for what they believe will be a decade-long shift in how businesses operate.

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That doesn’t mean valuations don’t matter. They absolutely do.

But one of the biggest mistakes investors make is assuming that “expensive” automatically means “overvalued.” The market has always been willing to pay premium multiples for businesses with dominant market positions, strong balance sheets, recurring earnings power, and large long-term growth opportunities.

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We saw this with companies like Microsoft and Amazon over previous cycles, and we are seeing similar dynamics play out again today across selective areas of AI, software, and cybersecurity.

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Importantly though, this isn’t 2021-style speculative growth investing. The market has become far more selective. Investors are rewarding profitable growth, strong cash flow generation, and businesses with genuine competitive advantages, while speculative or unprofitable companies continue to struggle.

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That distinction matters.

From a portfolio positioning perspective, we continue to focus on businesses we believe can compound earnings over many years rather than simply chasing short-term momentum. While market volatility can feel uncomfortable in the moment, periods of weakness often provide the opportunity to add to high-quality businesses at far more attractive prices.

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The last few months have been a good reminder of that.

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While headlines remain unpredictable, the underlying drivers of many of the world’s best businesses remain remarkably resilient. Digital infrastructure demand continues to grow, cybersecurity spending remains essential, cloud adoption continues to expand, and AI investment is accelerating globally.

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Markets will always move through periods of fear, optimism, and uncertainty. That’s normal. But over the long run, earnings growth and business quality tend to matter far more than headlines.

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As always, our focus remains on staying disciplined, thinking long term, and positioning portfolios in areas where we see durable structural growth rather than short-term noise.

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Because while markets can become emotional in the short term, successful investing is usually much quieter than the headlines suggest.