As we wrap up a positive month for the markets, with U.S. indices reaching record highs, the final week of July delivered a flurry of developments, including new trade deals, a key Fed meeting, encouraging GDP figures, mixed labor market data, and earnings reports from many large U.S. companies. Trade agreements and tariffs have reemerged as central themes, with recent pacts finalized with the EU and Japan just ahead of potential disruptions from new tariffs. While the August 1 deadline for the rest of the world introduces renewed uncertainty, these deals have alleviated some immediate concerns, fostering a brighter outlook for global businesses. We’ll leave the broader debates to the experts, who are sure to weigh in soon; our focus, as always, remains on the pure market implications and the opportunities they present. Encouragingly, firms like Piper Sandler anticipate a surge in U.S. capital spending, propelled by onshoring trends and supportive tax provisions—trends that align well with our portfolio strategy and position us for continued success.
Despite recent concerns about high valuations in many mega-cap tech names—where hype has driven multiples to stretched levels—our portfolios remain balanced, emphasizing high-quality companies with robust fundamentals that offer better value in out-of-favor sectors. While frothy valuations in trending tech areas prompt caution, attractive opportunities have emerged elsewhere, particularly in healthcare, where select biotech plays are trading at compelling discounts. For instance, large-cap pharmaceutical firms are grappling with challenges like patent cliffs and intensifying competition, as underscored by Novo Nordisk’s recent decision to slash its 2025 sales and profit outlooks amid mounting pressure from rivals like Eli Lilly. This has opened the door to undervalued prospects in this space, allowing us to capitalize on resilient innovators at reasonable prices.
In line with this approach, we’re pleased to announce the addition of three dynamic small-cap companies to our portfolio this month, each poised to capture growth in high-potential sectors. Halozyme Therapeutics is a biopharmaceutical innovator that develops advanced drug delivery solutions to make treatments for cancer and autoimmune diseases faster, more effective, and more comfortable, thereby enhancing patient care. EnerSys is a global leader in energy storage, manufacturing industrial batteries that power electric vehicles and renewable energy systems, supporting the shift to a sustainable future. YETI Holdings, Inc. is a premium outdoor lifestyle brand renowned for its durable coolers, drinkware, and gear, resonating strongly with outdoor enthusiasts. These additions strengthen our exposure to healthcare innovation, clean energy, and premium consumer markets, aligning with enduring growth themes.
At the core of our strategy is a focus on investing in high-quality businesses with strong fundamentals, including high returns on capital, enduring competitive advantages (or “moats”), predictable cash flows, and low debt. These companies are typically resilient, globally diversified, and operate in industries with consistent demand. We prefer to purchase them at reasonable valuations to avoid overpaying, which could diminish future returns. We steer clear of speculative or overhyped stocks, unless their valuations align with long-term value creation. This approach seeks consistent, above-average returns with lower volatility than the broader market, avoiding market timing or speculative bets. Instead, we prioritize enduring businesses that can compound wealth over decades, even if it means short-term underperformance during market frenzies.
While market volatility may arise from policy changes or trade uncertainties, we remain confident in the ongoing economic transformation. AI, automation, and global diversification are unlocking new opportunities. Our focus on quality, flexibility, and undervalued assets positions your portfolio for long-term success. We’re excited about the road ahead and deeply grateful for your trust.
