Analysis and Summary: Business Insights and Market Implications

Overview of Investment Strategy

• Munro Partners' portfolio manager remains confident in the structural earnings growth potential of its core holdings despite market volatility.
• The Munro Global Growth Fund Complex ETF () returned 17% net of fees over the year to February 28, demonstrating strong performance.

Focus on Structural Growth Winners

• The Fund targets 30–50 companies across sectors, including US (two-thirds), Asia, Europe, and cash positions.
• Key areas of interest (AoIs) include:
  • AI-related growth: Companies like Alphabet, Amazon, Meta, Microsoft, and Nvidia are seen as long-term winners due to increased capex spending on AI.
  • Security/defense: European defense spending has surged post-Trump's policies, benefiting companies like Rheinmetall (up >100% YTD).
  • Climate infrastructure: Investments in companies like Constellation Energy (), the largest US nuclear operator, are expected to grow due to AI-driven power demand.

Adaptation and Risk Management

• The Fund uses short positions for market protection but remains bullish on earnings growth.
• Reduced exposure to semiconductor businesses despite their long-term potential as key enablers of AI applications (e.g., Nvidia).

Strategic Shifts and Portfolio Adjustments

• Profit-taking in high-performance computing sectors to invest in infrastructure and security.
• Focus on blue-chip growth stocks like Microsoft and ServiceNow for digital enterprise themes.

Market Trends and Implications

• AI-driven growth: Large hyperscale companies (Alphabet, Amazon, Meta, Microsoft) are expected to lead earnings growth through AI advancements.
• Global trade dynamics: Despite trade war concerns, structural winners in defense and AI are expected to outperform.
• Climate change impact: Increased demand for power infrastructure to support AI applications is seen as a long-term growth driver.

Competitive Dynamics

• The "Magnificent Seven" (Alphabet, Amazon, Meta, Microsoft, Nvidia, Tesla, Apple) remain key holdings despite reduced exposure post-2022.
• Competition in AI and cloud services is expected to drive innovation and earnings growth for these tech giants.

Long-Term Effects and Regulatory Considerations

• AI's broad applicability across industries suggests significant long-term opportunities.
• Deregulation and lower corporate taxes under Trump's agenda are seen as productivity boosters, though regulatory risks may emerge in the future.

Key Takeaways

• Munro Partners' focus on structural growth winners in AI, defense, and climate infrastructure positions it for long-term gains despite market volatility.
• The Fund's strategic shifts (e.g., reducing semiconductor exposure while investing in power infrastructure) reflect a proactive approach to capitalizing on emerging trends.
• Earnings growth potential remains strong for hyperscale tech companies and AI enablers like Nvidia, driven by capex spending and innovation.