With volatility likely to remain heightened within global equity markets throughout United States President Donald Trump’s remaining 1,566 days in office, Sam Chipkin Founder and CIO of 5AM Capital warns investors that history is less likely than ever to provide meaningful insights into future performance.
One way to protect against earnings pressure headwinds confronting companies in the wake of Trump’s tariffs, adds Chipkin is to focus on stocks less exposed to cyclical downturns.
“Trump volatility isn’t over and we should expect a range of headlines and decisions that perpetuate a risk-off position by institutional and retail investors alike,” says the Bondi-based fund manager.
Chipkin doesn’t expect normal headline volatility until U.S.-China trade rhetoric dials down.
Less US market exposure
While Chipkin doesn’t expect Trump’s tariff mayhem and broader governmental interference to result in a huge market wipeout, he does urge investors to be less exposed to overheated U.S. markets.
With the S&P 500 trading at a price to earnings (P/E) ratio of 33 times, 80% above its long-term median, Chipkin worries that the market is still priced for perfection heading into more volatile trading conditions.
In light of these valuation metrics, he says certain sectors – especially those with a retail bent – could continue to disappoint.
Less cyclical exposure
Instead of investing in stocks heavily exposed to cyclical swings, Chipkin, a global equity investor based in Australia, has built a portfolio of stocks comprising what he euphemistically describes as boring, monopolistic "compounders".
That’s fund manager speak for stocks that can consistently compound shareholder wealth by generating stable, consistent returns while also offering capital protection potential.
Chipkin is focused on unearthing what are often described as “moat stocks” that have sustainable competitive advantages, not the least being near-monopoly status within the sectors they operate in.
Chipkin cultivated his appetite for these types of stocks during his decade-long tenure at Macquarie in New York, which invested in monopoly infrastructure like pipelines, cell towers, airports, toll roads, and rail lines.
Interestingly, while Chipkin recalls his former employer’s disdain for the term monopoly, he reminds investors that stocks with significant market share tend to outperform their competitors, delivering outsized share price performance.
“Monopolies may face criticism and regulatory challenges, but their ability to dominate markets, innovate, and deliver exceptional value makes them compelling investment opportunities,” says Chipkin.
Niche sectors
While moat stocks can be found across all industry sectors, Chipkin tends to focus on stocks within essential services, testing/commissioning businesses and those in the infrastructure space for an improved inflow of customers.
While these businesses are often regulated, Chipkin says the nature of their business makes them indispensable, which mitigates the risk of severe regulatory actions.
Chipkin is also attracted to technology companies with ecosystems that competitors cannot replicate, ensuring long-term dominance.
“We actively seek out investment opportunities in monopoly-like businesses and "cosy cartels," Chipkin told Azzet.
“We want to be investing in number one and number players in their respective sectors.”
While the U.S. still accounts for 52% of Chipkin’s Global Equity Fund (Eu 30%, Asia 10%, and cash the remainder) he’s cautious about the broader U.S. market and only holds positions in two of the magnificent seven: Microsoft (NASDAQ: MSFT) and Amazon (NASDAQ: AMZN).
Niche stocks
Most of Chipkin's 15-25 long positions include stocks most investors may have never heard of. These include:
Hemnet Group AB (publ): Sweden’s leading property classifieds portal, which to Chipkin exemplifies the power of network effects.
With 90% of all properties sold in Sweden listed on Hemnet, it generates 9x the traffic and commands an audience 11x larger than its nearest competitor.
Intuit (NASDAQ: INTU): While Australian investors will be more familiar with Xero, Chipkin prefers the U.S. giant Intuit, which he says is more dominant, operates in a far larger market and is also valued at a lower EV/EBIT multiple (24x FWD).
With its QuickBooks software, Intuit has a dominant 80%-plus market share of the U.S. online accounting market for small-to-mid-sized enterprises.
Verisign (Nasdaq: VRSN): Often described as the "toll road of the internet" Verisign operates under stringent regulation, with predictable pricing increases and contract renewals linked to operational performance.
Other stocks
While Chipkin tends not to invest locally, one ASX-listed midcap within his portfolio is Audinate Group (ASX:AD8) which has created its own niche through the development and sale of digital audio visual networking solutions.
Chipkin's portfolio is also invested in U.S. tech stock Adobe (NASDAQ: ADBE) which he says looks oversold relative to its growth profile and solid tech stacks.
For the uninitiated, a tech stack refers to a collection of technologies, including programming languages, frameworks, libraries, and tools, that are used to build and run a software application or system.
Also included within Chipkin’s Global Equity Fund is Eurofins Scientific SE a French group of laboratories headquartered in Luxembourg, providing testing and support services to the pharmaceutical, food, environmental, agriscience and consumer products industries and to governments.
Key fund details: The Global Equity Fund
- Minimum Investment: A$250,000. Additional investments of $50,000 or more may be made.
- Investor Eligibility: Wholesale clients.
- Currency exposure: AUD, unhedged
- Application Processing Frequency: Monthly
- Management costs: 1.0% p.a.
- Performance Fee: 15% of excess returns over the benchmark (8% p.a.). Additionally, performance fees are subject to a high watermark.
- Primary Focus: High quality global stocks with durable competitive advantages.
- Track Record: 5AM Capital deliversa 19% annualised return since inception (from the 1st July 2022 to the 28th February 2025). 4% growth calendar year-to-date.
- Funds under management: $100 million.
This article does not constitute financial or product advice. You should consider independent advice before making any financial decisions.
