Navigating Global Small Caps in an AI-Transformative World | EP157

Art of Boring

Portfolio Manager Karan Phadke discusses his views on the global markets and the performance of the global small-cap portfolio. He illustrates how businesses are adapting to and utilizing artificial intelligence (AI), highlighting the difference between the value-added reseller and IT consultant business models. Two portfolio holdings, CBIZ and Convatec, are discussed to demonstrate the team's focus on well-run, resilient companies that are trading at reasonable valuations. Key points from this episode:

• The U.S. remains a strong outperformer, while Europe continues to see more sluggish growth.
• Current portfolio strengths include resilient U.S. companies, particularly in the professional employer organization (PEO) space with companies that provide outsourced HR functions.
• AI is impacting businesses in three main areas: hardware, software, and services. The team focuses on services, which is comprised of companies that help their clients acquire and integrate the hardware and software to use AI effectively.
• Regarding generative AI, there's still a very heavy lift involved at the onset to get the data clean and ready to use.
• When looking at the strategy from the top down, the team seeks out resilient businesses trading at reasonable valuations that are well-run with strong managers who are reinvesting capital intelligently.
• CBIZ exemplifies the strategy's focus on well-run companies with recurring business models while Convatec represents a business with solid management and long-term growth potential.

Host: Andrew Johnson, CFA, Institutional Portfolio Manager Guest: Karan Phadke, CFA, Portfolio Manager

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/navigating-global-small-caps-in-an-ai-transformative-world-ep157

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