Why we’ve bought 10 new stocks this year

Rathbone Global Opportunities manager James Thomson talks about his heightened activity this year, performance and investment style, and the new mega-trend exciting him.

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Dave Baxter, senior fund content specialist at interactive investor: Hello and a very warm welcome back to our Insider Interview series. I’m Dave Baxter here at ii and today I’m joined by James Thomson, lead manager of Rathbone Global Opportunities Fund S Acc (BH0P2M9). James, thank you very much for joining today.

James Thomson, lead manager of Rathbone Global Opportunities Fund: Thank you for having me, Dave. 

Dave Baxter: Performance has been pretty poor in the last year. It hasn’t looked that great. What would you say were the main factors driving that? And do we have any glimmers of hope for that to turn around? 

James Thomson: Yes, I’m sorry, it’s been sort of hard to love, I think, over the last year. Performance has been challenged as the market really is focusing on the single theme in the market, which is, of course, AI and the disruption that has brought to a lot of other sectors which are potentially affected by it.

So, we’ve faced some headwinds. We’ve actually suffered because we want a broad and balanced and diversified portfolio in a world that really just wants that single theme. So, it’s been difficult, but in many ways, I think when we look back on this period, we’ll view it as one of the great opportunities. 

This has been a very active year in terms of the fund, in terms of new positions and buying into new holdings that, frankly, we’ve wanted to own for many years and, finally, a lot of these companies have come into our crosshairs. So, I think it’s a good opportunity to buy some new positions and to acknowledge some mistakes, taking out some of those holdings while still maintaining a broad and balanced portfolio.

So, it’s an interesting moment in the market and I think we can use it as an opportunity to build from. 

Dave Baxter: You’ve mentioned that portfolio activity has really ramped up in 2026. Let’s get a bit more detail on that. What have you been buying? What kind of trends have you’ve been targeting? 

James Thomson: Yes, this has been the most active year in the fund’s history. At this point in the year, we bought 10 new stocks in the fund. Most of those have come off our watch list of companies that we’ve been looking to buy for many years, and now finally they’re in range.

The nature of those investments are varied, though. Some are the sort of AI-disrupted businesses that we think the market has overly discounted. Some are in our defensive bucket of investments that create even more protection for the portfolio during potential economic dislocations, inflation increases or interest rate increases that may come through. 

Others are in a new mega-theme that I think is emerging. We have experienced significant underinvestment in many of the old economy parts of the market, particularly in the resources sector, and those companies have underinvested in the capital spending that they need in order to significantly roll out this AI infrastructure. 

Many countries also are looking at the US longingly, at the resource independence the United States has. And clearly some of the geopolitical conflicts we’ve suffered recently have shown the vulnerability of many countries that the US market doesn’t have because they have energy independence. So, we can take a picks and shovels-type approach here, buying the companies that are the beneficiaries of this capital spending boom that is coming.

Many of the resources areas have under-invested for the last 15 years, and they need to upgrade their equipment and machinery, and so we have bought quite a number of holdings in that area that will benefit from that capex boom that we see coming over the next few years. What are a couple of examples of those companies? We have bought Caterpillar Inc (NYSE:CAT) in the fund, we’ve bought Parker Hannifin Corp (NYSE:PH), and Sandvik AB (OMX:SAND), a mining equipment maker based in the Scandinavian region. 

We continue to own an industrial business called Amphenol Corp Class A (NYSE:APH), which makes connectors, part of the building blocks of so many data centres in our industrial digitalizsation, electrification growth that we’re in the early innings of embarking [on].

So, there are some exciting holdings and a few waiting in the wings as well that potentially could make it into the portfolio in the months ahead.

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Dave Baxter: Interesting. If we speak very broadly about what’s going on in markets, the so-called quality growth investment style has really struggled. Are there ways in which you think that can turn around? What should investors be looking out for?  

James Thomson: Yes, you’re absolutely right. There’s been a shift away from quality growth, resilient, reliable, repeatable growth. Fund managers often call it long-duration growth. Those investment stories that were prized for their mission-critical repeatable earnings over 10 or 20 years, and as AI has entered the room, that has created a significant shift. Partly due to fear that potentially those long-duration stories are vulnerable, and so earnings persistence has pivoted into earnings inflexion. 

So many investors have sold growth-related companies and bought value because they see a kind of hockey stick higher in profitability over the visible time period over the next one to three years. That has created a lot of pressure from the more quality growth end of the market and has definitely affected us as well. 

What changes that? Well, probably some sort of indigestion or air pocket for the runaway AI growth story. Now, I’m not an AI naysayer, we have significant exposure to the AI theme within the fund.

We’ve owned NVIDIA Corp (NASDAQ:NVDA) for seven years. We own ARM Holdings  ADR (NASDAQ:ARM), which is one of the major players in CPUs. We have Amphenol, an industrial business that allows data centres to light up properly. We have significant power infrastructure investments, construction and engineering for the AI roll-out. So, a significant part of the fund is in this theme, but we do want protected ways of playing AI. 

So, if you’re looking for a sort of rebirth of a broadening of the market, you probably have to have a slowdown or a period of air pocket for the AI story. And I think in many ways that will be disruptive to the overall market, but I think it can create some significant opportunities as well.

What would cause that disruption in the AI growth story? Well, it could be shortages in power, it could be shortages in water, which is vital for the cooling of data centres, it could be delays in planning permission for these projects to be rolled out. It could be political pressure. There are quite a lot of politicians in the United States now who are running on an anti-data centre platform, and some of those politicians are winning. 

I don’t necessarily think the arguments are correct, but it potentially could slow down the roll-out of the story, and that will create quite a significant concern, I think, in the market towards some of these stories where the growth rate has been assumed to accelerate. 

I think the broad story here is that usually markets turn when the primary issue that the market is worried about stops getting worse. And I think markets roll over when the main source of excitement stops getting better. So, if you remember thatmaxim, that usually is a useful way to understand potential flexion points in stock markets. 

Dave Baxter: An interesting bit of news in the funds world recently was the fact that Terry Smith, a big fund manager, has quite dramatically changed his process in order to adapt to these more momentum-driven markets. How are you acting now? Have you been tempted to change the fund dramatically? In what ways have you been adapting? 

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James Thomson: Well, we’re not changing our investment process or style, but it’s always been important to be adaptable. I think that is something that our clients would say has been one of the hallmarks of this fund over time. I think you can see with the 10 new holdings that we’ve added to the portfolio this year that we are trying to adapt and be relevant for where the market is going. 

I think the reality that we also have to accept is that we live in a world of inconsistent returns and that you’re not always going to be at the top of performance tables every year. And I think longer-term outperformance…if that’s your goal, then you’re going to have to be willing to accept periods of underperformance in order to get there. Because if you’re constantly trying to change your process and your style, you’ll be whipsawed. 

Dave Baxter: If we look out to the next 12 months or so, what would you say are the biggest risks and biggest opportunities for the fund? 

James Thomson: Yes, quite. I think it’s harder than ever to predict the way the market trades on a short-term basis. I think there’s some obvious areas that we have to be cognisant of, and I think AI can actually be one of the greatest risks and also one of the greatest opportunities. So, we want to make sure that we play that theme in a protected way that we feel confident has long-term potential and can withstand some shorter-term storms.

From an economic perspective and a geopolitical perspective, we have to be aware that this is a more dangerous world that we live in that’s more unpredictable. The potential for inflation to remain stubbornly high is probably one of the greater macroeconomic risks, and we’re probably going to get a very real-time review on that inflation right now. If that inflation stays stubbornly higher, it potentially has the ability to force the hand of the Federal Reserve to put up interest rates, and that would be a meaningful market event that investors need to be aware of.

So, there are a number of risks out there in markets, but I think you always have to remember that some of the best returns come when you least expect it, and our ability to successfully move in and out of markets is always challenged. So, I think always the best advice to investors is to have a long-term plan, a long-term investment horizon, and that will often see you through the more turbulent periods that inevitably come. 

Dave Baxter: Finally, our usual question, do you have skin in the game? 

James Thomson: Yes, I do have skin in the game. This is my largest personal investment. It’s my kid’s largest personal investment, it’s my mother’s largest personal investment. It’s my wife’s second-largest investment. I must find out what’s going on there, but yeah, we’re all aligned in terms of our investment in the fund. 

Dave Baxter: Well James, many thanks for your time. 

James Thomson: Thank you, Dave.

Dave Baxter: And thank you for watching. As ever, please do let us know what you think in the comments. Hope you find it useful. And if you’re a fan of this series, do hit the like button and the subscribe button. Thanks and take care.