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 is cautious on the market, warning the long bond bull market may end and Big Tech is overvalued. They favor energy and Japanese stocks due to tight supply and cheap valuations. Key moves: increased Japan holdings (cross-shareholdings unwinding reveals value), added oil drillers (day rates rising confirm supply constraints), and cut Big Tech (doubtful about AI monetization).
One-sentence summary: The author maintains a [cautious] stance on the market, arguing that the fixed-income bull market may be ending and Big Tech faces cognitive dissonance. The portfolio is positioning for a value factor reversal by overweighting old-economy sectors such as energy and Japan.
Performance Comparison: The portfolio outperformed the benchmark this quarter, over the past 12 months, and over the past three years. The author attributes this to an unconstrained, contrarian, and diversified portfolio that has held its own in a narrow market dominated by the "Magnificent Seven." The top 50 stocks in the S&P 500 currently account for 57% of market capitalization, a level only exceeded in July 1932 and November 2000. The portfolio's underweight position in Big Tech has been a drag on performance over the past 12 months, but this was offset by strong returns from other sectors. The author believes the portfolio is well-positioned as mean reversion broadens the market.
Performance Comparison: Within the quarter, Apple, held at a long-term zero weight, became the largest positive contributor. The energy sector (including shipping and oil drilling) contributed the most, while U.S. airlines and casinos were the main detractors. The author notes that airline holdings serve, in part, as a natural hedge against the overweight in energy — the portfolio's largest deviation from the benchmark is in energy, with a weight of approximately 15% versus 5.2%, reflecting a widening global energy supply-demand gap.
Position Moves:
[Cautious] The author notes that strong U.S. employment reports have pushed up interest rate expectations, with the 30-year Treasury yield breaking above 5% for the first time since 2007. Investors are experiencing extreme cognitive dissonance — on one hand hoping for a Fed pivot, on the other hand fearing that "something will break." The author states, "Investors are experiencing an extreme case of cognitive dissonance as they fitfully come to terms with the realisation that the fixed income bull market that began in 1982 may finally be coming to an end."
Key Stocks/Sectors:
Forward-Looking and Risk Reminder: If Big Tech's prospects are discounted more heavily, it could catalyze a reversal of the value factor's underperformance trend since 2017. The author believes that interest rates exceeding GDP growth and inflation is the natural order, and positive real rates are unfavorable for long-duration stocks reliant on distant cash flows. The portfolio is overweight old-economy sectors like energy and materials, where companies have repaired balance sheets, consolidated industry capacity, and are returning cash via dividends and buybacks, with valuations providing a margin of safety. The Japan position (approximately 12.5%) benefits from the unwinding and monetization of cross-shareholdings, making the effective enterprise value much lower than unadjusted data suggests. The author notes, "the valuation anomaly [is] almost as attractive as it was at lower prices."
| Position | Action | Key Data/Rationale |
|---|---|---|
| Apple | Hold for Observation (Zero Weight) | Largest positive contributor this quarter |
| U.S. Airlines | Hold for Observation | Main detractor, partly a natural hedge against energy overweight |
| Casinos | Hold for Observation | Main detractor |
| Japan Holdings | Increased | Position rose to 12.5% (overweight ~6.5%), unwinding cross-shareholdings |
| Oil Drilling Companies | Increased | Rising day rates validate the supply-constrained thesis |
| Big Tech | Underweight/Reduced | Continuing trend, replaced by semiconductor equipment |
| Energy Sector | Overweight | Weight ~15% vs benchmark 5.2%, reflecting supply-demand gap |
| Materials Sector | Overweight | Old-economy sector, valuations provide a margin of safety |
Conclusion: Excluding Japan, the Hosking Partners team has conducted on-the-ground research this year across 10 markets, including South Korea, Hong Kong, Singapore, Turkey, Italy, Germany, France, Brazil, Chile, and Mexico. The team is excited about the possibilities afforded by their unconstrained mandate and diversified approach.
| Instrument | Direction | Author's One-Sentence View | Key Data |
|---|---|---|---|
| Japan Holdings | Increased | Cross-shareholding unwinding, valuations are almost as attractive as during low-price periods | Position raised to 12.5% (overweight by ~6.5%) |
| Oil Drilling Company | Increased | Day rates rising validate the supply-constrained thesis, new vessel construction costs remain high | New drillship construction cost exceeds $1 billion |
| Big Tech | Reduced | Continuing underweight direction, using semiconductor equipment as a substitute | CapEx expectations quadrupled to 16% within nine months |
| Energy Sector | Overweight | Reflects widening global energy supply-demand gap, largest deviation from the benchmark in the portfolio | Weight ~15% vs. benchmark 5.2% |
| Materials Sector | Overweight | Old economy sector, valuations provide a margin of safety | Not specified |
| Apple | Hold & Observe | Long-term zero weight, largest positive contributor this quarter | Not specified |
| U.S. Airlines | Hold & Observe | Major drag, partially serves as a natural hedge against the energy overweight | Not specified |
| Casinos | Hold & Observe | Major drag | Not specified |