00:00If you're thinking about indices, I am concerned about the high concentration in some of the most
00:05commonly used indices in equities. I mean, if you think about Asia, there are three stocks that make
00:12more or less one third of the Asia indices. If you think about the S&P, there's just over 20
00:17stocks,
00:17I'm at half of the market cap of the index. So I am concerned about that level of concentration,
00:27what happens if those stocks turn. But from a broader market perspective, I see a lot of
00:33opportunity. I mean, look at earnings. The earnings season has been strong and interesting has been
00:39strong on a broad level, has been strong from a geographic standpoint. European earnings actually
00:45now have one of the lower gaps in terms of EPS growth compared to the U.S., has been strong
00:52in
00:52the emerging market area. And also, if you look at the specific companies, there are some real
00:57outstanding winners that are not actually in AI. And so there is a lot of comfort that you can draw
01:04from that. How comfortable are you with the view that those earnings and that earning strength can
01:08continue in an environment of high gas and high oil prices for Europe? So that is clearly something
01:14that we have to watch because some companies have proven very resilient to higher energy prices. Let's
01:20not forget that companies, particularly in Europe, have learned their lesson since what has happened
01:25with the Ukraine war and the gas curtailing. But there are other companies that are just still very
01:33exposed to energy prices. So it's really important to make a difference in your portfolio where you see
01:38a potential exposure versus companies where you see more resilience.
01:42Are you surprised that earnings are as strong as they are? It feels like the consumer, at the end of
01:47the
01:48road, everybody's a bit more unconvinced about what is happening here and a little bit more cautious.
01:52Earnings are absolutely booming right now.
01:56I'm positively surprised by some of the earnings. The one thing that, however, you continue to see is
02:02companies even in the same sector continue to perform very differently, even on a fundamental level.
02:08So how company management has actually innovated, how they have responded to their customer needs,
02:16and of course, how they've made their businesses more resilient because constant changes, right?
02:20We have changes in the supply chain with changes in the cost of inputs. That has been absolutely key
02:25for earnings. So you got a stock pick? Yes, always, always, Guy. Do you outperform stock picking or is the
02:33index just – the index movements, are they just strong enough that that's what you do?
02:38I think you can outperform the index in these markets. And especially you can create a better
02:45risk-adjusted portfolio, right, where you're not exposed to such a small group of very large stocks.
02:50Those are two different things. Can I outperform the index and be risk-adjusted?
02:54Yes, you can. Yes, you can.
02:55OK. That's easy to do? No, it is not. Actually, it requires a lot of work. And that is probably
03:01why in the
03:02asset management industry you see many more investing in research, right, in proprietary
03:07research and in-house research. And that remains one of the key elements to outperform in this market.
03:13What's looking under-owned right now? So many of those AI losers that actually you've seen
03:21outperforming over the last couple of weeks, I think they're still under-owned. So there was this big
03:28concentration on the AI enablers and some of them are still very valid investments. But at the same
03:35time, some of the stocks, for example, in the software area, you've seen a couple of really
03:40strong earnings results coming from software. And those were the companies that were caught in the
03:45Southamageddon and their earnings were strong. And at the same time, their pricing was weak. And also some
03:51companies that are using AI in the operations. And you're starting to see the impact of those changes
03:58on their costs and also on their revenues.
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