Hosking Partners is a London boutique founded in 2013 by Jeremy Hosking, a portfolio manager at Marathon Asset Management for over 25 years. It runs a single global equity strategy built on the capital-cycle, supply-side approach — contrarian, long-term, and unusually diversified (350+ holdings) under a multi-counsellor model, managing around $5.5bn.
This report says Hosking Partners chose to sit tight during the tariff-driven market plunge rather than panic-sell. They believe the selloff confirms that markets were too focused on tech stocks and passive investing, which was unsustainable. They are betting more on Japan and Sri Lanka, saying Japanese companies are undervalued and a stronger yen is what Trump wants. They remain underweight the US. They also note that cyclical stocks like airlines are already priced for a recession, so there's no rush to sell.
One-sentence summary: The author remains steadfast in holding positions amid market turmoil, arguing that the tariff shock validates market imbalances and reinforces the contrarian bets of underweighting the US while overweighting Japan and Sri Lanka. [Cautious]
Hosking Partners has firmly chosen inaction over panic selling in the face of negative external events such as tariff shocks. The report argues that of the two common fund responses—selling 20% for liquidity or staying put—the latter is not a "deer in the headlights" freeze, but rather an acknowledgment that better decisions can be made once more key facts are clear and uncertainty narrows. The author states: "We are not rabbits but are taking an alternative view of assessing probabilities implied by market prices and are evaluating where to bet with the market and where to bet against it."
Performance comparison: The original text does not provide specific returns or benchmark data for the current period or year, but the author notes that historically, selling into cash during market turmoil has not been a wise strategy, as investors are often forced to buy back at higher prices during recoveries. For example, less than two hours after this report was written, Trump announced a 90-day pause on reciprocal tariffs, triggering a brief market surge.
The report argues that the tariff events further validate their long-held view on market imbalances—namely, that investor focus on stock picking, growth stocks, momentum, U.S. index weighting, and passive investing has become unsustainable. The author believes the new U.S. administration is upending the economic orthodoxy of the past 50 years, and stock market trends are inevitably being disrupted. The new environment's focus on trade goods will primarily impact manufacturers, especially the high-tech sector, where declining returns on assets are long overdue, and current AI-related investment stands at US$320 billion. The author states: "The high technology industry seems acutely vulnerable in this regard. Declining returns on assets are long overdue in this sector, from profit margins effected by the supply chain, to say nothing of the US$320bn current year investment in AI-related activities!"
The report points out that the abnormal correlation in short-term stock price declines (i.e., nearly all stocks falling in sync) is counterintuitive, driven by program trading, short-termism, and cash selling, but this covariance phenomenon is likely unsustainable. Regardless of the final shape of the new regime, it will inevitably generate its own relative performance divergence.
Hosking believes that despite selling pressure on cyclical stocks from tariff shocks, many cyclical companies are already valued at recessionary levels; even with a 60% probability of recession, there is no rush to sell. The author judges that if these companies can avoid equity dilution, their long-term intrinsic value remains unaffected, and weak stock prices are only temporary. Many companies can create equity upside by cutting capital expenditure, such as airlines.
Position Moves:
The author emphasizes that while the events of the past 10 days have been dramatic, they offer limited guidance on stock market conditions over the long term (e.g., 2035). For clients with a ten-year investment horizon, 2035 is the appropriate endpoint. Hosking's long-standing "North Star" has been to steadily increase contrarian bets, and the turbulent start of President Trump's term has significantly increased the probability of ultimate success.
Outlook and Risk Warning: The author acknowledges that tariffs have both an ideological component (e.g., a 10% universal import tariff) and an opportunistic one ("escalate to de-escalate"). If Trump's gamble succeeds and market access improves substantially, it would be a clear positive for free trade and the global economy. However, the author believes this is not a bet worth taking, as there are more fertile areas to explore.
| Instrument | Direction | Author's One-Sentence View | Key Data |
|---|---|---|---|
| United States | Reduce / Underweight | Confidence in underweighting the US has strengthened; tariff shocks confirm the judgment of market imbalances | No specific figures |
| Sri Lanka | Add / Overweight | A non-index country offering favorable risk-return characteristics | No specific figures |
| Japan | Add / Overweight | The largest "major country" weight, expected to attract more global investors; management continues to improve ROE, with enterprise value valuations at historical lows | Enterprise value valuations at historical lows |
| Airlines (Industry) | Hold / Observe | Many cyclical companies are already at recession-level valuations; even with a 60% recession probability, there is no rush to sell; equity upside can be created through capital expenditure cuts | Recession probability at 60% |
| High-Tech Industry | Not explicitly stated | The decline in return on assets was long overdue; profits are affected by supply chains; current AI investment stands at $320 billion | AI-related investment at $320 billion |