Global stocks had a relatively quiet month in January at the headline level of the MSCI World Index, which was held up by European market strength, whilst the US drifted down after some gains at the start of the month. The portfolio fell in value though, particularly in the final week as news of a new legal services tool from AI company Anthropic hit the newswires. This caused a rapid decline in the share prices of companies such as Wolters Kluwer and RELX that service the legal profession. A broader range of software and professional information companies have seen significant share price declines accelerate as a result of a number of tools released by AI companies, including Claude Code. Whilst we acknowledge that there is scope for new AI-enabled entrants to the markets such companies dominate - that also include Experian, Amadeus and LSEG in the portfolio - we think that the share price declines are overdone. The core of many of these businesses is not merely the software, it is the high quality, industry-specific data that they possess and is not available to other firms, including AI businesses. Most new tools deal with workflow, which the incumbents provide and indeed have AI-enabled offerings of their own. Also, AI-tools are useful in many domains, but Amadeus deals with the highly complex world of travel sales where outcomes have to be right.
The businesses named made up 16% of the portfolio during January, and the severity of their share price declines marks an increasing opportunity, in our view, and we have topped up the holdings. The moves additionally mask a rotation that is going on in the market toward the more defensive sectors that dominate the portfolio. In the list of top performers for the month were Health Care and Consumer Goods firms that are, on the whole, posting solid full year results and trade at very attractive valuations. The commentary from the information services companies in their upcoming results will be very interesting, as will the developments in market trends that are accelerating in some areas, but quietly shifting in others.
Global stocks had a relatively quiet month in January at the headline level of the MSCI World Index, which was held up by European market strength, whilst the US drifted down after some gains at the start of the month. The portfolio fell in value though, particularly in the final week as news of a new legal services tool from AI company Anthropic hit the newswires. This caused a rapid decline in the share prices of companies such as Wolters Kluwer and RELX that service the legal profession. A broader range of software and professional information companies have seen significant share price declines accelerate as a result of a number of tools released by AI companies, including Claude Code. Whilst we acknowledge that there is scope for new AI-enabled entrants to the markets such companies dominate - that also include Experian, Amadeus and LSEG in the portfolio - we think that the share price declines are overdone. The core of many of these businesses is not merely the software, it is the high quality, industry-specific data that they possess and is not available to other firms, including AI businesses. Most new tools deal with workflow, which the incumbents provide and indeed have AI-enabled offerings of their own. Also, AI-tools are useful in many domains, but Amadeus deals with the highly complex world of travel sales where outcomes have to be right.
The businesses named made up 16% of the portfolio during January, and the severity of their share price declines marks an increasing opportunity, in our view, and we have topped up the holdings. The moves additionally mask a rotation that is going on in the market toward the more defensive sectors that dominate the portfolio. In the list of top performers for the month were Health Care and Consumer Goods firms that are, on the whole, posting solid full year results and trade at very attractive valuations. The commentary from the information services companies in their upcoming results will be very interesting, as will the developments in market trends that are accelerating in some areas, but quietly shifting in others.