Art of Boring

U.S. Mid-Cap: The Physical Economy Comeback, Capital Intensity, and Portfolio Positioning | EP 216

In this episode, Jeff Mo, U.S. mid-cap portfolio manager, explores a fundamental shift in how economies may grow over the next decade. He makes the case that after 25 years of intangible, internet-driven expansion, growth may increasingly depend on building physical things again: data centers, electrical infrastructure, factories, defense systems, satellites. Jeff walks through the forces driving this transition, from AI's voracious appetite for capital to geopolitical tensions reshaping supply chains and defense spending. The conversation examines how these macro themes connect to bottom-up stock selection, where the U.S. mid-cap team is finding opportunities today, and why maintaining inherent contradictions in the portfolio remains essential even as thematic investing dominates market behavior. • Why producing one unit of GDP today requires about a third as much oil as in the 1970s, yet capital expenditure per unit of GDP growth may be rising as the economy shifts from intangible services back toward physical infrastructure and manufacturing. • How AI data center buildouts, reshoring of manufacturing, rising defense budgets, and the expanding space economy are all driving higher demand for physical capital, commodities, and industrial capacity after a decade of underinvestment. • How the hyperscalers (Google, Amazon, Microsoft, Meta) are moving from massive net cash positions to net debt as they fund AI infrastructure, tightening capital availability for the rest of the economy and potentially raising interest rates and dampening consumer spending. • Where the U.S. mid-cap team is finding opportunities aligned with these themes, from companies like Northrop Grumman, SanDisk, and OSI Systems, while maintaining portfolio balance through inherent contradictions. • Why humility matters most when contemplating big-picture themes: the goal isn't predicting the future but building a diversified portfolio of wealth-creating companies that can withstand multiple scenarios. [00:00] Introduction: From Intangible to Physical Economy [00:50] Opening Discussion with Jeff Moe [01:42] Oil Efficiency vs. Rising CapEx Requirements [03:39] Economic Growth: Labor, Capital, and Productivity [04:11] Infrastructure Investment and Reshoring Trends [06:52] Defense Spending and Capital Intensity [07:08] The Space Economy: Satellites and Connectivity [11:00] Memory Market Dynamics and Contract Changes [12:22] Cyclicality in a Capital-Intensive Economy [15:04] Consumption vs. Investment: Portfolio Implications [17:44] Connecting Themes to Bottom-Up Research [18:44] Idea Generation and Stock Selection Process [21:32] Winners and Losers: The Bits to Atoms Trade [22:00] Portfolio Construction: Inherent Contradictions [25:21] Where the Theme Might Be Wrong [26:09] Long-Term Wealth Creation and Economic Optimism [28:18] Closing and Subscription Information Host: Rob Campbell, CFA Institutional Portfolio Manager Guest: Jeff Mo, CFA Portfolio Manager This episode is available for download anywhere you get your podcasts. Visit us at: https://www.youtube.com/@MawerInvestment [https://www.youtube.com/@MawerInvestment] https://www.mawer.com [https://www.mawer.com] https://www.linkedin.com/company/mawer-investment-management/ [https://www.linkedin.com/company/mawer-investment-management/] https://www.instagram.com/mawerinvestmentmanagement/ [https://www.instagram.com/mawerinvestmentmanagement/] Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. #ArtOfBoring #MawerInvestmentManagement #MawerInvestment #Podcasts #capitalmarkets #geopoliticalinvesting #commodityMarkets #capitalexpenditure #physicalEconomy #GDPGrowth

International Equity: Finding Quality Opportunities in Today's Market

In this episode, Peter Lampert, international equity portfolio manager, examines the Middle East conflict and its implications for global markets. He walks through the portfolio's diversification strategy, explains the team's nearly 40-year history with Shell, and explores how a changing market backdrop has challenged traditional definitions of quality and why forward-looking analysis may matter more than historical patterns. * How the Middle East conflict and the Strait of Hormuz blockade are affecting oil and LNG flows, and why equity markets have largely looked through the disruption so far. * The portfolio's diversification strategy, balancing energy importers like TSMC with energy producers like Shell to create resilience across different scenarios. * Why the team exited Shell in 2015 during the commodity boom, and what changed to make it attractive again when they reinitiated the position in 2022. * How the traditional quality factor has underperformed over the last five years as interest rates and commodity prices rose, rotating investor interest away from high-quality growth companies. * Why forward-looking analysis is critical—finding wealth-creating companies that don't fit the conventional quality mold, like European defense companies and Korean memory producers benefiting from AI demand. 0:00 Introduction & Episode Overview 0:27 Disclaimer 0:44 Middle East Conflict and Market Implications 1:13 Strait of Hormuz Blockade and Energy Disruption 2:10 Key Risks: Oil, LNG, and Infrastructure Damage 3:30 Portfolio Positioning and Energy Exposure 4:39 Case Study: How TSMC Manages Energy Risk 6:42 Portfolio Diversification Strategy 7:27 Balancing Energy Importers and Producers 8:37 Shell: A 40-Year Investment History 10:35 Quality Factor Underperformance 11:00 Redefining Quality in Changing Markets 14:41 Final Thoughts: Long-Term Perspective 15:19 Closing Remarks and Subscribe Host Info: Rob Campbell, CFA Institutional Portfolio Manager Peter Lampert, CFA Portfolio Manager Visit us at: https://www.youtube.com/@MawerInvestment [https://www.youtube.com/@MawerInvestment] https://www.mawer.com [https://www.mawer.com/] https://www.linkedin.com/company/mawer-investment-management/ [https://www.linkedin.com/company/mawer-investment-management/] https://www.instagram.com/mawerinvestmentmanagement/ [https://www.instagram.com/mawerinvestmentmanagement/] #ArtOfBoring #MawerInvestmentManagement #Podcasts #BeBoringMakeMoney

Global Credit: Energy Shocks, AI Borrowing, and Signs of Stress | EP 214

In this episode, Brian Carney, lead portfolio manager of the Mawer Global Credit Opportunities Strategy, examines a fixed income backdrop reshaped by geopolitical escalation, an energy shock, and sharply changing interest-rate expectations. He explains why higher benchmark yields and modestly wider spreads still leave many parts of credit looking expensive, where Mawer is finding more selective value through bottom-up research, and why the strategy remains tilted toward shorter-duration, higher-quality credit. The conversation also explores AI-related bond issuance from hyperscalers, signs of strain in leveraged finance and private credit, and what a more fragile lending environment could mean for investors. Highlights: * How geopolitical escalation and higher oil prices have pushed inflation concerns back to the forefront and reshaped rate expectations in major markets. * Why higher benchmark yields have not been enough to make much of longer-duration or lower-quality credit compelling today. * A look at two selective opportunities: CoreWeave, tied to AI infrastructure, and a fallen angel with potential catalysts and downside protection. * How AI is being used inside Mawer's research process to sort through a vast global credit universe and surface new ideas. * Why massive borrowing by hyperscalers to fund AI CapEx could pressure investment-grade spreads over the next 12 to 18 months. * Early signs of stress in leveraged loans and private credit, and why Brian sees growing evidence of "decay" in parts of the lending market. Chapters: [0:00] Introduction [0:32] Disclaimer [0:49] Welcome and Guest Introduction [0:54] Macro Environment Shifts: Geopolitical Tensions and Energy Shocks [1:44] Impact on Global Credit Markets and Central Bank Expectations [4:32] Where to Find Value in Credit Markets Today [6:47] Portfolio Positioning: Defensive Stance Explained [7:18] Credit Opportunity #1: CoreWeave and the AI Revolution [8:35] Credit Opportunity #2: A Fallen Angel Opportunity [9:49] Using AI Technology in Credit Research [10:59] Hyperscaler Bond Issuance: The New Market Dynamic [13:47] Impact of Tech Giants Crowding the Investment Grade Market [14:56] Private Credit Risks and Bank Syndication Challenges [16:53] Signs of Decay in Private Credit Markets [20:42] Closing Thoughts: Positioning for Opportunity [21:16] Outro Host: Kevin Minas, CFA Institutional Portfolio Manager Guest: Brian Carney, CFA Portfolio Manager This episode is available for download anywhere you get your podcasts. Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com [https://www.mawer.com]. Follow us on social: LinkedIn - https://www.linkedin.com/company/mawer-investment-management/ [https://www.linkedin.com/company/mawer-investment-management/] Instagram - https://www.instagram.com/mawerinvestmentmanagement/ [https://www.instagram.com/mawerinvestmentmanagement/]

Quarterly Update | Q1 2026 | EP 213

In this episode, Institutional Portfolio Manager Kevin Minas and Investment Counsellor Stu Morrow examine the forces shaping markets in the first quarter of 2026. From the escalating conflict in the Middle East and its impact on oil, inflation, and growth to the broadening AI disruption across software and asset-light business models, they explore how investors can stay thoughtful in an increasingly complex environment. The conversation covers stagflation risks, bond market dynamics, the role of gold as a hedge, and the portfolio adjustments being made as quality businesses face new tests of durability in a changing world order. Key Highlights: • Middle East conflict and stagflation risks: The escalation in Iran has dominated Q1, with the Strait of Hormuz carrying a fifth of daily global oil and gas consumption. Beyond energy, the conflict threatens fertilizer supplies, semiconductor inputs, and global growth—raising the specter of stagflation as slowing growth meets rising inflation, limiting central banks' ability to cut rates. • Equity market performance beneath the surface: While headline quarterly returns appeared calm, significant sector and regional divergence emerged. Energy outperformed (benefiting Canada and developed international markets), while U.S. mega-cap tech and software faced scrutiny over AI CapEx spending and disruption risks. • Bond markets challenged in inflationary environment: Central banks stayed on the sidelines in Q1, balancing inflation concerns against growth risks. Yields rose across the curve, with bonds selling off alongside equities and challenging their traditional safe-haven role. Diversification within fixed income—including global credit with higher yield and lower duration—remains critical for navigating different market regimes. • AI disruption broadening beyond software: The AI "loser" narrative expanded from software providers to consultants, insurance brokers, wealth managers, and other asset-light business models. Markets are pricing in disintermediation risk even where fundamentals haven't deteriorated, with stocks treated as "guilty until proven innocent" based on concerns about future cash flows. • Discipline through uncertainty: Despite multiple potential outcomes from geopolitical and market disruptions, Mawer's investment process remains focused on competitive advantages, durable returns on capital, and disciplined management. The playbook has been updated through broad diversification and careful position sizing—emphasizing that a quality approach carries investors through periods of heightened complexity. Host: Kevin Minas, CFA, MBA, CAIA Institutional Portfolio Manager Guest: Stu Morrow, CFA Investment Counsellor This episode is available for download anywhere you get your podcasts. Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com [https://www.mawer.com]. Follow us on social: LinkedIn - https://www.linkedin.com/company/mawer-investment-management/ [https://www.linkedin.com/company/mawer-investment-management/] Instagram - https://www.instagram.com/mawerinvestmentmanagement/ [https://www.instagram.com/mawerinvestmentmanagement/]

Global Equity: When the Voting Machine Overwhelms the Weighing Machine | EP 212

In this episode, global equity portfolio manager Paul Moroz examines how investors can navigate a market increasingly shaped by conflict, shifting narratives, and wider ranges of possible outcomes. He begins with the recent escalation in the Middle East and the market's relatively measured response, then considers the second-order effects that can matter just as much as the initial shock. The conversation also explores how recent AI-driven swings in software have revealed a market increasingly influenced by thematic flows and short-term sentiment, rather than the more measured process of weighing business fundamentals. Throughout, Paul returns to a central idea: good portfolio management is rarely about one big call, but about making many small, disciplined decisions within a diversified portfolio. Highlights: * Why the market's reaction to the recent escalation in the Middle East has remained relatively measured so far * John Deere as a second-order effects case study: how rising oil and fertilizer costs can affect customer economics, margins, and capital allocation * Thematic trading and the gap between price and intrinsic value: the Centrini AI thought piece in February triggered a broad software sell-off, showing how quickly disruption narratives—not fundamentals—can dominate market pricing * Capital intensity isn't the enemy—poor returns are. Microsoft and Amazon are pouring billions into AI infrastructure, but a key question is whether bundling compute with distribution advantages will deliver attractive returns on that capital. * Why Paul believes the market's "voting machine" is increasingly overwhelming the "weighing machine." Markets vote on sentiment every day but building real businesses (and real wealth) takes years of focusing on fundamentals while tuning out the noise. Host: Rob Campbell, CFA Institutional Portfolio Manager Guest: Paul Moroz, CFA Portfolio Manager This episode is available for download anywhere you get your podcasts. Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com [https://www.mawer.com/]. Follow us on social: LinkedIn - https://www.linkedin.com/company/mawer-investment-management/ [https://www.linkedin.com/company/mawer-investment-management/] Instagram - https://www.instagram.com/mawerinvestmentmanagement/ [https://www.instagram.com/mawerinvestmentmanagement/]