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Worldwide All Cap
An unconstrained investment strategy that invests in companies across the world which are positioned to contribute to, and benefit from, sustainable development.
Our Worldwide All Cap strategy was launched in November 2012. It is an unconstrained investment strategy, by which we mean it is not restricted to certain countries, and is able to invest in between 40-60 companies all over the world. As with all of our strategies, we are interested in finding only the very best businesses; those with high quality management teams, franchises, and financials, that are well positioned to contribute to, and benefit from, sustainable development.
Strategy highlights: a focus on quality and sustainability
- Companies must contribute to sustainable development. Portfolio Explorer >
- We invest in high-quality companies with exceptional cultures, strong franchises and resilient financials. How we pick companies >
- We avoid companies linked to harmful activities and engage and vote for positive change. Our position on harmful products >
- Our approach is long-term, bottom-up, high conviction and benchmark agnostic
- We focus on capital preservation as well as capital growth – we define risk as the permanent loss of client capital
Strategy name change
Please note, from 21 November 2024 Stewart Investors Worldwide Sustainability name will be updated to Worldwide All Cap. By 30 June 2025, the Stewart Investors Australian Unit Trust Fund names will be updated to reflect these Strategy name changes. Please refer to this note for further information.
Latest insights
Quarterly updates
Worldwide All Cap strategy update: 1 January - 31 March 2025
“Only two things make up a railroad: a track and a locomotive.” Amid the constant barrage of news about tariffs, trade wars and geopolitical realignment, this recent comment – by the chief financial officer (CFO) of one of our companies – provided a timely reminder that things are sometimes simple. It also underscored why we are glad to be bottom-up investors. Through all the noise of the first quarter of 2025, we focused on finding companies with experience in navigating unpredictable political and economic storms and who keep their eyes firmly fixed on their long-term goals.
We added four new holdings over the quarter. The first, Cintas (United States: Industrials), began its life in 1929, just as the Great Depression began, by collecting old rags from factories, washing them and then selling them on. Since then, it has grown to become a leading provider of corporate uniforms and related business services, specialising in uniform rental, workplace cleaning and first aid and safety products. It combines the benefits of scale with a local presence across to provide value and excellent service to its customers across the United States.
Mahindra & Mahindra (India: Consumer Discretionary) is a company in which our Asian strategies have been long-term investors, recognising its combination of excellent stewardship and its ability to both contribute to and benefit from sustainable development in India. We believe Mahindra & Mahindra still has plenty of room to grow by leveraging its dominance in the agricultural sector to expand its tractor business, capitalising on the increasing demand for electric vehicles, diversifying its financial offerings to tap into the growth of India’s middle class and reinvesting today’s cashflows in nurturing new businesses and expanding its global footprint.
BDO Unibank (Philippines: Financials) is the largest bank in the Philippines, where it has excellent opportunities for growth. Financial inclusion in the Philippines remains low and the bank is expanding its digital services to reach both the unbanked and underbanked. It benefits from being part of the larger SM Group and from its extensive branch network, through which it offers a comprehensive suite of financial services. We believe BDO Unibank’s shares trade on an attractive valuation, particularly if we consider the strong economic fundamentals of the Philippines and the opportunities the bank has to grow.
Finally, Air Liquide (France: Materials) is a global leader in supplying gases, technology and services to companies across a wide range of sectors including healthcare, chemicals, manufacturing, electronics and food and beverages. It operates in a highly consolidated market and its long-term inflation-linked contracts should help cushion it from any volatility in the wider economy. Meanwhile, the increasing use of hydrogen gives it an opportunity to grow.
To fund these purchases, we sold our holdings in six companies during the quarter. In the case of three – Nordson (United States: Industrials), MonotaRO (Japan: Industrials) and Zebra Technologies (United States: Information Technology) – they had performed well but we began to have concerns over their future growth. We also sold Tata Communications (India: Communication Services) after reassessing the balance between risk and opportunity.
Lastly, we sold the remainder of our holdings in two health-related companies: CSL (Australia: Health Care) and Novonesis (Denmark: Materials). Both had been excellent performers for us but a combination of elevated valuations and the growth expectations they implied prompted us to look elsewhere.
We continue to find opportunities to invest in the shares of reasonably valued companies worldwide that we believe can (profitably) help to solve a range of development challenges. Being unconstrained by a benchmark allows us to seize those opportunities wherever they arise. At a time of rapid economic and geopolitical change, we continue to apply our investment philosophy consistently and to focus on the things that we believe matter over our investment timeframe. As for what comes next? Another comment from the CFO we quoted earlier encapsulates our view: “there’s only one way to go in rail, and that’s forward!”
Case Study: Halma
Listing: London Stock Exchange
Market cap: GBP10 billion1
Held in fund since: March 2020
Company description
Halma is a global group of companies who develop innovative safety, health and environmental technologies aimed at enhancing quality of life and protecting people and the planet. Its stated purpose is “to grow a safer, cleaner, healthier future for everyone, every day.”
Why do we like it? / Investment rationale
In a world in which the importance of health and safety is rightly receiving increased attention, a relatively unknown UK engineering company has been quietly innovating and saving lives for more than 50 years. It has also consistently reinvested cashflows and generated compound returns for its shareholders. Since its foundation in 1972 by David Barber and Mike Arthur, Halma has combined strategic long-term vision with underlying purpose – a combination that still holds true today.
From its early years, Halma has focused on developing innovative safety solutions for industry. Not only has it gained a reputation for quality and reliability, it has also developed a distinctive business model along the way. Key to that business model is the acquisition of niche companies. Halma is a disciplined buyer, targeting well-run small-to-medium-sized companies whose technologies are helping solve some of the world’s most pressing challenges and keeping people safer, cleaner and healthier. Over 50 years on from its founding, Halma consists of nearly 50 companies and employs over 8000 people in over 20 countries.2
- In safety… businesses include Firetrace, which automatically detects and suppresses fires in high-risk equipment.
- In environmental analysis… businesses include Deep Trekker, whose cutting-edge underwater robotics make maintaining offshore wind farms easier.
- In healthcare… businesses include PeriGen, which monitors more than 600,000 births a year, tracking foetal heart rate and labour progression to provide early warnings if things start going wrong. According to the WHO, over 800 women and one million newborns die each year due to preventable causes during pregnancy and childbirth3. After the PeriGen technology was introduced into a regional hospital in central Africa, the mortality rate was reduced by more than 80%.4
By supporting the management of the businesses it acquires and allowing a brand to grow even after the original founder steps away, Halma has steadily built a reputation as a ‘good owner’. This has helped make it the preferred buyer for many founders. This, in turn, has supported Halma’s organic growth and given its shareholders access to the cashflows of businesses that would otherwise have remained in private hands.
Halma’s focus is on growing the market and providing value to its customers by acquiring niche companies, rather than trying to take market share from competitors. Using its internal cashflows to buy companies in areas in which it is already an expert, reduces risk and increases the chances of generating enduring returns. Over the past 20 years, it has grown its cashflows by 12% per annum and its earnings per share by 13% per annum5, as it continues to make good on its long-term vision.
With future growth supported by structural developments such as growing safety regulation, increasing demand for healthcare and clean water and efforts to address climate change and pollution, we see no reason why Halma’s growth can’t continue for at least another 50 years.
What could go wrong? / Risks
The chief risks facing Halma include the levels of debt on its balance sheet, a degradation of its ability to acquire good companies and the potential for product-related failures.
[1] Source: S&P Capital IQ as of 31 March 2025.
[2] https://www.halma.com/who-we-are
[3] https://www.who.int/news-room/fact-sheets/detail/maternal-mortality
[4] https://www.halma.com/our-impact/protecting-mothers-and-babies-during-childbirth
[5] Halma annual accounts between March 2004 and March 2024 as reported by FactSet.
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 0.5%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.
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Worldwide All Cap strategy update: 1 October - 31 December 2024
“We are allocating our own money, we act like owners.”1 It’s always pleasing to meet with a company that thinks similarly to us. We are stewards of our clients’ capital, and one key tenet of our Hippocratic Oath is “We will not forget in our search for returns that the primary risk faced by our clients is losing their capital”. The oath underpins our investment philosophy, which is based on identifying quality stewards of strong franchises with good long-term growth prospects.
During the quarter we bought six new companies and the quote above is from a meeting with the company management of the first of them. Brown & Brown (United States: Financials) was founded in 1939 and is still stewarded by the Brown family. Over the past 85 years, the competent, ambitious and long-term management team has enabled it to grow beyond its Florida base to become the sixth largest insurance broker2 in the United States. The company has also been expanding to Asia and Europe and given the fragmented nature of the insurance brokerage industry, there is plenty more room to grow in the decades ahead.
Mining equipment manufacturer, Epiroc (Sweden: Industrials), started life over 150 years ago as part of another Swedish company, Atlas Copco, and was spun out as a separate company in 2018. Their equipment makes it easier and safer to mine the metals that are essential for the functioning of modern society, including the energy transition. They have a solid and long-tenured management team, led by CEO Helena Hedblom, who have delivered growth historically and have positioned the company well for the future.
Nexans (France: Industrials) makes cables for a variety of uses including buildings and energy grids. The need for electrification creates a strong growth driver as more cables are needed to connect diverse energy sources as well as upgrading existing grids. We have watched Nexans for some time and took the opportunity of an attractive valuation to enter a position.
Wabtec (United States: Industrials) is a leading provider of components for rail transportation and can trace its roots back over 100 years. The rail industry is as important now as it was then, as it plays a crucial role in reducing global emissions through both freight and passenger transportation. Rising investment in rail infrastructure along with increasing market share and improving profit margins provide compelling growth drivers over the long term.
KLA Corporation (United States: Information Technology) make inspection tools for the semiconductor industry. These help chip manufacturers control their processes, maximise their output of finished chips and reduce waste. Due to their essential position in the semiconductor manufacturing process, KLA have been able to compound returns solidly over many years generating strong cash-flows and consistent growth.
With household names such as Advil, Sensodyne and Centrum, Haleon (United Kingdom: Consumer Staples) was formed by a merger of the consumer health divisions of GlaxoSmithKline, Novartis and Pfizer in 2022. Providing necessary products to customers is a business model that we always appreciate for its ability to produce consistent cash-flows and to be defensive throughout a market cycle. With healthy profit margins and strong market position, we believe Haleon has the quality needed to contribute to the strategy.
The new positions were funded by selling five companies where we have concerns about the strength of their franchises.
Tecan (Switzerland: Health Care) and Sartorius (Germany: Health Care) have both struggled over the past few years due to a slowdown in investment into biotechnology. Despite seeing green shoots of growth elsewhere in healthcare, these two companies are still struggling, from lack of visibility in customer orders, exposure to China and increasing competition.
We fully exited from our position in Unicharm (Japan: Consumer Staples) due to lack of conviction that Asian consumer markets will provide a large enough growth opportunity in the future. We also sold Shimano (Japan: Consumer Discretionary) due to concerns about their valuation in the face of increased competition from electric bikes. Finally, we sold A. O. Smith (United States: Industrials) as its growth potential faces persistent challenges in its core markets of the US and China.
In the past quarter the US election has taken place, sending Donald Trump back to the White House along with a Republican Party majority in the House of Representatives and the Senate. There have been many column inches written about taxes, tariffs and other general speculation about what the incoming administration might do. We don’t have any insights into the workings of a Trump presidency, instead, we focus on finding companies that are adept at navigating difficult situations and practised at generating growth from the opportunities in front of them. Another tenet of our Hippocratic Oath is “We will strive to achieve, through hard work, sober analysis and sound judgement, the best risk-adjusted returns possible for our clients.” This focus means we will continue to seek companies, like Brown & Brown, who we believe will be excellent stewards of our clients’ savings.
[1] Source: Stewart Investors company meeting with Brown & Brown, February 2024.
[2] Source: Brown & Brown website - https://www.bbrown.com/us/about/
Case Study: WEG
Listing: Brasil Bolsa Balcão
Market cap: US$37bn1
Held in fund since: November 2012
Company description
WEG manufactures electrical products, including energy efficient motors, transformers, turbines and generators. Its production facilities span 17 countries and produce around 19 million motors every year.2
Why do we like it? / Investment rationale
In 1961, a young electrician, mechanic and administrator founded the electric motor company to which they lent their initials: Werner Ricardo Voigt, Eggon João da Silva and Geraldo Werninghaus.
Today, WEG produces electrical products, including motors, for end markets as broad as industrial automation, power generation and distribution, and large electric vehicles. While the second generation of the three founding families remain majority shareholders, it is run by long-tenured managers. The new CEO, Alberto Yoshikazu Kuba, is only the fourth in WEG’s history; he joined the business in 2002, aged 24. He exemplifies how much of WEG’s success derives from a culture built over 65 years.
WEG is a vertically integrated company; they make every element of every product themselves, and even source packaging from their own forest. This helps them supply customers with more customised, hard-to-replace motors. While it is less efficient than outsourcing and slows the rate of capacity expansion, it has a critical advantage for WEG: it empowers them to take market share when competitors are paralysed by supply chain snarl-ups. WEG’s self-sufficiency is helping them supply transformers to electricity-hungry data centres, even as competitors face a four-year delay in building additional capacity.3
Doing more with less, under their own steam, is in WEG’s DNA. Vertical integration also limits production waste. In Brazil, WEG collect and recycle older motors at the end of their life and recycle them along with production scrap metal. In this sense, WEG’s operations mirror their products’ functionality: efficiency. WEG’s motors help customers both reduce their energy requirements and reduce their greenhouse gas emissions. They are even used in dramatic sustainability solutions such as the Kaleshwaram Lift Irrigation Project which helps address water shortages in India. WEG’s motors will help move 240 thousand million cubic feet of water, greater than the volume of Lake Michigan, over 500 kilometres into northern India.4
Operational excellence undergirds WEG’s stable profitability, despite some cyclicality in sales growth. WEG’s balance sheet features a high cash balance to allow for the opportunistic purchase of raw materials when supply chains are fraught, and for acquisitive growth in the international business. We are excited to see where WEG’s conservatism and continuous innovation take the company next.
What could go wrong? / Risks
Risks facing WEG include raw material prices, competition from Chinese and Indian manufacturers, and cyclicality in its end markets.
[1] As of 7.1.25.
[2] 2023 integrated report - https://api.mziq.com/mzfilemanager/v2/d/50c1bd3e-8ac6-42d9-884f-b9d69f690602/b96ceffc-95bf-5115-8eec-72fbc563ea72?origin=1. Production facilities as of 31.12.23; WEG in Numbers | WEG.
[3] World’s largest transformer maker warns of supply crunch’; Financial Times article, 3.11.24.
[4] WEG supply for Kaleshwaram irrigation project. 240 thousand cubic feet = 1.63 cubic miles. Lake Michigan is 1,180 cubic miles by volume: Lake Michigan: How Big Is It? - The Environmental Literacy Council.
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 0.5%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.
Worldwide All Cap strategy update: 1 July - 30 September 2024
The quarter has seen some market turbulence, driven by uncertainty over interest rates and geopolitical developments, as well as emerging questions over the ability of the largest technology stocks to continue their upwards trajectory. The strong focus on technology, and particularly artificial intelligence (AI), over the past year means that other sectors have been neglected. As a result, we believe there are many quality stocks that are now attractively priced for long-term growth, most of them addressing problems in the real world.
We bought four new positions during the quarter, all in the industrials sector, but with very different end customer markets and applications.
Rentokil Initial (United Kingdom: Industrials) is a global leader in pest control services, a necessary and critical health and hygiene service to secure homes, hospitals and businesses against disease and damage. Its business model is fundamentally local in nature and generates lots of cash through resilient, recurring sales. The management team is focused on growth by increasing the density of its route network, and so driving improvements in profitability and earnings.
Applied Industrial Technologies (United States: Industrials) is one of the largest distributors of industrial motion and control technologies in the United States. Its products are used in end applications such as power transmission, fluid power, flow control and other industrial processes that help its customers be more productive and efficient and do more with less. It has a strong brand, well-poised to leverage its scale and customer network for growth as the world becomes increasingly automated.
ESAB Corporation (United States: Industrials) sells gas control equipment, welding equipment and particularly the metal alloys that are required for welding. Welding is not only a foundation technology to support the modern world, without welding there would be no buildings or trains, but it also plays a key role in supporting the green transition through its use in wind turbines and other green infrastructure. Its strength in supplying the metal alloys means they generate a lot of cash from recurring sales, which supports its balance sheet and allows it to invest in new business opportunities.
Simpson Manufacturing (United States: Industrials) make connectors, fastening systems, adhesives and speciality chemicals that connect, strengthen and support the joints within wooden and concrete structures. Its end customers are construction companies which rely on high-quality parts to comply with building codes and regulations. Its products make buildings stronger and safer, improving their ability to withstand extreme weather events, which are becoming more common as the planet warms.
The acquisitions were funded by two divestments during the quarter. Coloplast (Denmark: Health Care) makes ostomy bags and wound care products. We had started reducing the position last quarter due to valuation and decided to exit completely due to potential challenges facing a recent acquisition. Natura (Brazil: Consumer Staples) sells beauty and personal care products. We have held Natura in the strategy for many years as a company with long-term owners that embedded sustainability into their business model from the early days and had international expansion opportunities ahead of it. They acquired Avon in 2022 which ultimately proved more difficult to integrate and turn around than we anticipated, and we have taken the decision to invest in better opportunities elsewhere.
We are always looking at new companies and recently visited Sweden to meet with some new and some old businesses. These included Atlas Copco (Sweden: Industrials), the world's leading manufacturer of air compressors, and access solutions provider Assa Abloy (Sweden: Industrials), both of which are held in the strategy. The opportunity to meet with company management on their ‘home turf’ is invaluable; it is much easier to get a sense of how culture and people have shaped a company and its future return profile when sitting within their offices; or, in the case of Atlas Copco, 20 metres below their office in a test mine. We continue to find excellent investment ideas by focussing on the impact that outstanding people can have on businesses with strong franchises and resilient financials.
Case Study: Atlas Copco
Listing: Nasdaq Stockholm
Market cap: US$83bn1
Held in fund since: September 2020
Company description
Founded in 1873 to make products for Sweden’s railways, Atlas Copco is a multinational provider of industrial solutions including air compressors, vacuum pumps, and tools. It derives 70% of its sales from outside Europe.2
Why do we like it? / Investment rationale
Atlas Copco was named after the mythological Titan who carries the sky on his shoulders; such lofty etymology highlights the ambition, determination and passion that has driven this company over 151 years. Beginning with one of the three original founders of the business, André Wallenberg, Atlas Copco continues to be stewarded by the Wallenberg family, and benefitted from their support during two difficult periods in the 1880s and 1930s when the business pivoted from railway products to diesel motors and, finally, air compressors.
Atlas Copco’s end markets are well-diversified, ranging from manufacturers of semiconductors, automobiles, food and beverage, and pharmaceuticals. The product portfolio is formidable, but Atlas Copco’s key innovation was the development of energy-saving variable-speed drive compressors in 1994, which are still iterated today using new software and sensors to optimise performance. The latest version saves a further 11% of CO2 emissions compared to their predecessors, and as much as 90% of the energy used can be recovered for use in heating or steam.3 Further innovations in dry air compressors – critical in the manufacture of electronics – exemplify the rewards of Atlas Copco’s sustained research and development (R&D) spending, which was 4% of sales in 2023.4
As innovative as Atlas Copco’s new products are, their closeness to customers allows them to seize the opportunity of finding new applications for existing products such as the use of an oil-free air compressor to create ‘bubble curtains’ around offshore wind developments. This reduces underwater noise by over 90% to protect marine wildlife.5
Much of Atlas Copco’s innovation has been spurred by the decentralised model. This splits the business into divisions and smaller business units, which are entrusted with autonomy and accountability for their own profit-and-loss statement, as well as customer engagement. An internal job market and strong encouragement of internal mobility – including internationally – has built a strong culture, whether employees are based in Stockholm or Manila. Testament to this is the enduring tenure of both the CEO Vagner Rego (25 years) and the CFO Peter Kinnart (31 years).
With a relatively asset-light business model and outsourced manufacturing, Atlas Copco’s cash flows are stabilised by recurring servicing and aftermarket revenues. Ongoing acquisitions into new technologies should complement organic growth opportunities within industrial electrification and digitalisation, setting Atlas Copco up for another 150 years.
What could go wrong? / Risks
Atlas Copco faces the risk that worsening macroeconomic conditions may reduce customer budgets and propensity to spend. There is also the risk of intensifying competition from Chinese companies.
1 As of 19.9.24.
2 CapIQ.
3 No waste - low emissons - Atlas Copco Group
4 Keeping it dry - Atlas Copco Group. R&D spend – S&P Capital IQ.
5 Oil-free bubble curtains protecting marine life - Atlas Copco UK.
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 0.5%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.
Worldwide All Cap strategy update: 1 April - 30 June 2024
“We want to help lift the whole industry up”1.
Advanced Drainage Systems (United States: Industrials) are the second largest plastics recycler in the US but they want to do more. They are investing in a grinding facility and considering investments in sorting technology, which would improve margins and make plastic recycling more attractive to other companies.
We recently visited the United States to meet with a wide range of industrial and consumer companies across Chicago, Cincinnati, Columbus, Cleveland, Boston and New York. In total we met with 50 companies, many of them leaders in their industries. We highlight some of the companies we met with in more detail here along with reasons why we believe they fit so well with our investment approach. The trip was a great reminder of the number of excellent companies out there with competent and ethical stewards that generate returns by focusing on building long-term franchises in profitable niches.
During the quarter we added three new positions. Ashtead Group (United Kingdom: Industrials) is an industrial and construction equipment rental company that derives the majority of its revenues from the United States. The franchise has high returns and opportunities for strong growth prospects given the fragmented nature of the equipment rental market. Roper Technologies (United States: Information Technology) owns, buys and builds software companies that are leaders in their niches. This business model generates strong cashflows that can be used to buy more businesses, setting it up to continue to generate cashflows well in the future. TopBuild (United States: Consumer Discretionary) is the largest installer and distributor of insulation in North America. They are well positioned to grow from acquiring smaller businesses in another fragmented market and building economies of scale, supported by the growing need for more energy efficient homes and commercial buildings.
We continue to be vigilant about valuations and this is reflected in our decision to divest completely from seven positions. Three of these were from companies that, in our view, had reached rich valuations: Fisher & Paykel Healthcare (New Zealand: Health Care), Admiral (United Kingdom: Financials) and Marico (India: Consumer Staples). We divested from bioMérieux (France: Health Care) to consolidate the exposure to life sciences and from Kotak Mahindra Bank (India: Financials) to consolidate our exposure to Indian banks which are facing a more competitive environment. We divested from Synopsys (United Kingdom: Information Technology) and from Spirax Group (United Kingdom: Industrials) due to concerns about ongoing risks to their respective franchises coupled with valuations that left no room for error.
During the quarter, one of our companies was targeted by an activist investor who was concerned that it was overbuilding manufacturing capacity. Their concerns were based on near-term revenue expectations in an industry that is expected to grow by multiples in the coming years. We disagreed as the company’s record of counter cyclical and industry leading investments has handsomely rewarded patient shareholders and we wrote to offer them our support.
The market concentration we highlighted last quarter shows no sign of abating with continuing excitement about any company connected with building Artificial Intelligence (AI) infrastructure. We do not have any insight into how new technologies work through an economy nor where the main revenues or profits will appear. Instead of allowing ourselves to be distracted by a single growth driver, we seek to build a portfolio of companies that can benefit from a wide range of diverse growth drivers, as we believe that this is the best way to protect and grow our clients’ capital over the long term.
1 Source: Stewart Investors investment team, June 2024
Case Study: Roche
Listing: Swiss Market Index
Market cap: US$221bn
Shareholders since: September 2022
Company description
Founded in 1896 by Fritz Hoffman-La Roche, Roche is a multi-national healthcare company that produces pharmaceutical drugs, as well as diagnostic equipment and reagents. In 2023, its medicines treated 22 million patients worldwide and its diagnostic systems 29 billion test results.3
Why do we like it? / Investment rationale
One hundred and thirty years on from its foundation, Roche continually finds new ways to meet patient need. The ownership of the Hoffman and Oeri families empowers Roche to pursue decade-long opportunities; that Roche has had just seven CEOs in 125 years is testament to their long-term outlook.
Roche is industry-leading in its research & development (R&D) spend at 26% of pharmaceutical sales – almost USD15 billion4– and has produced blockbuster drugs in areas as diverse as neurology, oncology, and immunology. Their multiple sclerosis drug Ocrevus, for example, has over 25% share in the United States5; a recent formulation allows treatment by injection rather the original 4-hour infusion, saving patient and healthcare professionals’ time.6 Roche’s sustained investment in drug development has built a diversified pipeline of over 100 drugs, with nine in final phase testing7. Nor is Roche averse to finding new development methods; their gene therapy subsidiary, Genentech, has entered a strategic collaboration with Nvidia using artificial intelligence to maximise drug discovery opportunities within Roche’s extensive datasets.8
The pharmaceutical business has been strengthened by Roche’s market-leading diagnostics segment, which offers strong recurring revenues from the sale of consumables as well as equipment. Roche currently offers 600 tests and plans to launch a further 40 each year9. Long-term structural trends guide investment and development; Roche’s new, automated mass spectrometry systems (measuring the characteristics of chemical samples) should enable laboratories to perform more sensitive tests without hiring highly specialised technicians to operate complex machinery. Similarly, Roche has pioneered one of the first regulatory-approved10, self-administered cervical swabs to address low uptake of cervical cancer screening; an innovative solution that hopefully reduces the 4,000 annual, preventable deaths from cervical cancer in the United States, and many thousands more in middle- and low-income countries.11
Roche’s true opportunity lies at the intersection of its unique expertise across diagnostics, data, and drug development: personalised medicine, enabling earlier detection of illness, individualised treatment, and better patient monitoring. With its consistently strong balance sheet and strong cash flow generation – with cash flows growing at an average compound rate of 20% over the last 20 years12 – we believe Roche is ready to seize the opportunity.
What could go wrong? / Risks
Roche faces the risk of failures within its drug pipeline, although its extent and diversification, as well as the diagnostics segment, should cushion the impact of any one failure. Similarly, technological disruption could affect Roche’s business, despite its strong position in R&D investment.
3 Roche factsheet, 2023
4 Source: Stewart Investors investment team and company data
5 Source: Stewart Investors investment team and company data
6 Subcutaneous Ocrevus gets approval in EU for forms of MS (multiplesclerosisnewstoday.com).
7 Source: Stewart Investors investment team and company data
9 Source: Stewart Investors investment team and company data
10 Approved in the United States by the Food and Drug Administration (FDA)
11 Press release by Roche on cervical swab approval, 2024
12 S&P Capital IQ.
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 0.5%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.
Proxy voting
Worldwide All Cap proxy voting: 1 January - 31 March 2025
Proxy voting by country of origin
Proxy voting by proposal category
During the quarter there were 114 resolutions from eight companies to vote on. On behalf of clients, we voted against eight resolutions.
We voted against the remuneration policy at Diploma as we believe the increase in short-term (annual) bonus incentive does not encourage long term decision making. (one resolution)
We voted against executive remuneration and the remuneration report at Roche as we believe amounts paid to executives is high and lacks key metrics to determine and/or justify the amounts. We voted against a proposal on transaction of business as the company did not provide enough information about the proposal. We wanted to avoid giving them unrestricted decision-making power without sufficient clarity. (four resolutions)
We voted against the election of two directors and an audit committee member at Samsung Electronics as we do not believe them to be truly independent. (three resolutions)
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.
Worldwide All Cap proxy voting: 1 October - 31 December 2024
Proxy voting by country of origin
Proxy voting by proposal category
During the quarter there were 31 resolutions from five companies to vote on. On behalf of clients, we did not vote against any resolutions.
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.
Worldwide All Cap proxy voting: 1 July - 30 September 2024
Proxy voting by country of origin
Proxy voting by proposal category
During the quarter there were 88 resolutions from seven companies to vote on. On behalf of clients, we voted against seven resolutions.
We voted against the appointment of the auditor at Advanced Drainage Systems as they have been in place for over ten years. The company has given no information on intended rotation which we believe is important for ensuring a fresh perspective on the accounts. (one resolution)
We voted against remuneration motions at Ashtead Group as we were concerned about excesses in CEO salary. (two resolutions)
We voted against proposals related to amendments to articles (rules and regulations that govern the company's operations) at DiaSorin as the company did not provide enough information on the amendments. (three resolutions*)
We voted against the appointment of the auditor at Vitasoy as they have been in place for over ten years. The company has given no information on intended rotation which we believe is important for ensuring a fresh perspective on the accounts. (one resolution)
*The same proposal was voted on different stock lines.
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.
Worldwide All Cap voting: 1 April - 30 June 2024
Proxy voting by country of origin
Proxy voting by proposal category
During the quarter there were 446 resolutions from 32 companies to vote on. On behalf of clients, we voted against 26 resolutions.
We voted against the appointment of the auditor at A.O. Smith, Arista Networks, Edwards Lifesciences, EPAM Systems, Fortinet, Markel, Roper Technologies, Spirax Group, Synopsys, Texas Instruments, Veeva Systems and Zebra Technologies as they have been in place for over 10 years and the companies’ have given no information on intended rotation. We believe rotating an auditor on a relatively frequent basis (e.g. every 5-10 years) helps to ensure a fresh pair of eyes are examining the accounts, and follows best practice. (12 resolutions)
We voted against remuneration motions at Assa Abloy as we believe acquisitive businesses should incentivise management on returns as well as shares held. (two resolutions)
We voted against recasting of votes at Natura as we wish to avoid the election of potentially unknown nominees. We voted against a remuneration proposal which the company highlighted was based on a discrepancy in our third-party research, misrepresenting the underlying proposal. Unfortunately it was too late to reverse the vote. We have alerted our research provider to the error. (two resolutions)
We voted against a proposal regarding transaction of business at Tecan as the company provided no detail on the proposal and we wish to avoid unfettered discretion. (one resolution)
We voted against an amendment to officer exculpation at Veeva Systems as we are not in favour of limiting the responsibility of corporate officers. (one resolution)
We voted against recasting and cumulative voting at WEG as this would allow the board to make changes without shareholder assessment or knowledge of candidates. (three resolutions)
We abstained from voting on requests for a separate board election and the election of a Supervisory Council position at WEG due to insufficient information and our preference for the current family stewards to remain in place. (two resolutions)
We voted against the decision to grant a one-off executive award with short vesting conditions at Zebra Technologies as we did not see sufficient rationale to support it. (one resolution)
We voted against a shareholder proposal at A.O. Smith requesting the company report on hiring practices for people with arrest records as we do not deem it necessary or productive and support the company's hiring process. (one resolution)
We voted against a shareholder proposal regarding board declassification at EPAM Systems as we do not deem it necessary for all directors to stand for election annually and believe this could destabilise the board by allowing excessive turnover. (one resolution)
We voted against a shareholder proposal regarding greenhouse gas (GHG) emissions disclosure at Markel as the proposal called for disclosure of emissions from underwriting, insuring and investments, which is not yet widely or reliably reported in the industry, hence we would prefer to discuss the issue with the company. (one resolution)
We abstained from voting on a shareholder proposal to remove supermajority requirements for certain issues at Roper Technologies as the board didn't provide a recommendation. (one resolution)
We voted against a shareholder proposal mandating an independent director serve as Chair at Synopsys as we are confident in the stewardship of the current Chair and former CEO to lead the majority independent board. (one resolution)
We voted for shareholder proposals regarding the right to call a special meeting and requesting a report on customer due diligence at Texas Instruments as we found both to be sensible. (two resolutions)
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.
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