Attention scarcity has reshaped both society and markets, eroding deep thinking and pushing investors toward shorter horizons, herd behaviour and concentration risk. In this investment letter, Franz Weis, Comgest’s Chief Investment Officer, argues for grounding long-term investments in company fundamentals, historical earnings and resilient moats.

The sharp depreciation of the Japanese yen has fuelled a rally in Japanese value stocks. Comgest has consistently warned that this value rally is underpinned by fragile, cyclical drivers that could quickly reverse. In this investment letter, we explain why we believe quality growth companies, supported by strong balance sheets and consistent earnings growth are better positioned to deliver sustainable outperformance.

The AI boom has concentrated global equity markets in a few US tech giants, but as long-term investors Comgest focuses on building resilient, diversified portfolios through an unconstrained approach that targets quality growth across sectors and geographies.

Digitalisation, cloud computing, and AI are driving global data centre expansion. Big tech companies need more computing power for their AI services, increasing data centre infrastructure and environmental impact. In this investment letter, Comgest ESG Analyst Liudmila Strakondonskaya emphasises the need for effective governance and decision-making to balance AI growth with ESG considerations.

Investors often focus on tangible assets like inventory and machinery, but human capital—employee knowledge, skills, and experience—is oftentimes undervalued. French leather goods company Hermès exemplifies how human capital is the quiet force behind long-term success.

Smaller companies have underperformed in recent years as large-cap companies have recorded outsized returns. Despite this trend, we believe that there are several examples of smaller companies in Europe that possess the right mix of quality characteristics and growth drivers to potentially deliver substantial returns over the long run. At Comgest, we aim to build our portfolios with quality companies with enduring competitive advantages, irrespective of their size or market capitalisation.