Investment strategists who make tactical recommendations about asset allocation habitually wrangle about the virtues of the market’s equity options, namely:
| Cyclical vs. Defensive |
| Value vs Growth |
It is often difficult to classify a company’s shares as belonging to one of these categories. At EDM, we prefer to focus on the concept of quality, among other characteristics, linked to:
- Return on Equity (ROE);
- Foreseeable earnings-per-share (EPS) growth;
- Ability to protect margins;
- Innovation;
- Minimal/no debt;
- Market leadership;
- Quality management team.
This profile accounts for the bulk of our equity portfolios and has led the market recently. These companies operate global businesses, despite being based in the United States or European Union.
Market analysts have dubbed many of these companies “The Magnificent Seven” 1 in the US and the “11 GRANOLAS” 2 in Europe. Together they represent more than one-third of appreciations this year, and they constitute the core of our portfolios (see Graph).
1 Magnificent Seven: Nvidia, Microsoft, Meta, Tesla, Alphabet, Amazon, Apple.
2 11 GRANOLAS: GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oréal, LVMH, SAP, AstraZeneca, Sanofi.
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