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Challenging the consensus view

Market myopia

I never cease to be amazed by the degree to which opinions on the same facts or data differ. Take the current bull market, some cite it as evidence that inflation is beat, that US-China relations are thawing, that the pandemic overhang is past; I just see a very narrow rally[i] on sentiment towards Artificial Intelligence (AI) and the companies best positioned to exploit it – indeed, one wonders at the size of the capital pool that is now being managed by AI into AI. Short-attention spans and social media fan such thin analysis, with expansive claims based on narrow and misleading data quickly becoming the consensus view.

This is why it is so important that the portfolio managers in SKAGEN are given the freedom and support to think differently, and to challenge consensus; since, especially over the short-term, it can be uncomfortable to hold an uncommon view. And, just occasionally, the undoubted benefits of this contrarian investing are noticed when people bother to look away from the immediate and the fleeting and focus on the longer-term.

So, it was pleasing recently to see SKAGEN Focus recognised with a prestigious Lipper award[ii] as the best global small and mid-cap fund over three years in both the UK and the Netherlands. And as recently as this past week, SKAGEN Global and SKAGEN Kon-Tiki were recognised by Dine Penger as the top performing funds of the past five years in their respective categories[iii]. The fact is, SKAGEN has never been about the short-term, our relationships and our investment horizons are long; there is no better way to run our own and our clients' money.

History and tradition

Also, this past week, I had the good fortune to accompany a long-standing SKAGEN client and fellow Durham alumni to the installation of SKAGEN's 2023 New Year's Conference speaker Dr. Fiona Hill as Chancellor of Durham University. I had not visited the University since my own graduation in 1986. In the intervening period, the University has grown from a few thousand to over twenty thousand students on both undergraduate and post-graduate courses. Aside from the infamous Klute nightclub, what had not changed was the strong rooting of the University in the tradition of the Venerable Bede[iv], the Northumbrian seventh century scholar and Father of English history. Fiona Hill linked her own progression to this local academic tradition, and I was struck by just how powerful that narrative was – her story of the famed Durham miners inviting university faculty to lecture them on a regular basis was especially revealing.

History and tradition matter to SKAGEN too. It is important that we in SKAGEN maintain our links to the past and the principles on which our business has been built; the focus on the experience of you the client, our nearness and hospitality to you, and our willingness to embrace risk and contrarianism on your behalf. We can admit that these principles are sometimes tested so I am grateful to my many colleagues who live by this code, and who remind me of it periodically. We look forward to renewing these links during our upcoming thirty years' celebration in the autumn.

Summer reading

For those seeking inspiration, I can offer some recommendations of excellent books to fill those brief moments during summer leave when families allow for some solitude:

  • Chip Wars by Chris Miller – this is an epic account of the ongoing battle to secure arguably the world's most critical technological resource; in short, a non-fiction thriller. SKAGEN has deep connections to this sector with our investments over many years in the likes of Samsung. Understanding the struggles that surround the technology are sometimes as important as understanding the evident potential of it.
  • The Three Body Problem by Liu Cixin – I do not normally read science fiction, but this trilogy is outstanding and offers insight on a broad sweep of issues including modern China. With the Chinese stock market down over twenty percent from its January 2023 peak, investors are begging for some kind of stimulus to reverse the current bear market. Trying to understand China is a life's work, but this occasionally bleak but ultimately optimistic tale may shed some light. And if you can't face three books, the film is in production for Netflix subscribers.
  • Trust by Hernan Diaz – this new author has burst onto the literary scene with prizes galore for his second novel set in the financial turmoil of 1920s America; it offers a salutary lesson on self-deception.

It only remains for me to wish you all a restful summer with family and friends.

God Sommer

[i] In the US, seven companies – Apple, Microsoft, Alphabet (Google), Amazon, Nvidia, Tesla and Meta – have contributed most of the total S&P 500 gain of 15.9 percent so far this year.
[ii] Lipper awards recognise funds and fund management firms for their consistently strong risk-adjusted three, five, and ten-years returns relative to peers:
[iv] Bede was one of the greatest scholars of the Anglo-Saxon period. He produced a large number of works on subjects as varied as science, music, poetry and biblical commentary, but he is most famous for his Ecclesiastical History of the English People, one of our best-written sources for early English history.

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