The London Company's International Equity portfolio faced a challenging first quarter in 2026, primarily due to global market shifts and specific stock performances. The portfolio's gross decline of 6.5% significantly lagged the MSCI EAFE Index, which saw a more modest 1.2% decrease. This underperformance was influenced by various factors, including sector allocation and individual company news.
Taiwan Semiconductor Manufacturing Co. (TSM) emerged as a strong performer within the portfolio, benefiting from robust demand and upward revisions to its revenue forecasts, consistently exceeding market expectations. Conversely, SAP SE experienced headwinds as investor concerns regarding AI's disruptive potential overshadowed its positive top-line growth and margin expansion reports. ICON, PLC's stock also saw a sharp decline following an announcement of delayed fourth-quarter reporting, linked to an internal inquiry into past revenue recognition practices.
Looking ahead, The London Company anticipates that geopolitical events, particularly in the Middle East, will continue to be a dominant theme, likely sustaining heightened market volatility. The portfolio remains strategically focused on resilient, high-quality businesses, expecting that such investments will ultimately outperform once speculative market trends subside and fundamental value is re-acknowledged by investors. Recent adjustments reflect this conviction, with increased positions in Universal Music Group, ICON, and Magnum Ice Cream, while trimming holdings in BAE Systems and ASML after periods of strong growth.
In a world characterized by constant change and uncertainty, a steadfast commitment to investing in fundamentally strong companies becomes paramount. While short-term market fluctuations can be unsettling, focusing on businesses with solid foundations, clear growth drivers, and prudent management offers a path to long-term value creation. Such an approach not only navigates volatility but also positions investments for sustainable success, reinforcing the belief that diligence and foresight ultimately yield positive outcomes.
