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 the fund manager believes the US economy has achieved a soft landing (rate cuts without a recession), and markets will revert to normal, moving away from just a few mega-cap stocks. They favor cheap cyclical stocks and real assets, like platinum miners (just visited South Africa, see a bottom), Japanese mid-caps (bought on dips), and new holdings Wise (cross-border payments) and Loma Negra (Argentine cement). They warn that mega-caps like Microsoft and Nvidia are overvalued and face antitrust risks.
One-sentence summary: The author believes a soft landing has been achieved, and markets will revert to the mean. The strategy provides a margin of safety through low valuations and an overweight in cyclical sectors. [Cautiously Optimistic]
Performance Comparison: In the third quarter of 2024, the Hosking Partners strategy delivered a net return of 4.1%, underperforming the benchmark's 6.6%. Over the past 12 months, the net return was 27.9%, compared to the benchmark's 31.8%. Performance was strong in July and September, but overall results were dragged down by market turmoil in August. The author stated, "recessionary fears translated into weaker performance during the month as a result of its exposure to more cyclical sectors such as financials, resources and energy," meaning recession concerns led to weaker performance for the strategy during the month due to its overweight in cyclical sectors like financials, resources, and energy. The Japanese market contributed approximately 40 basis points of relative excess returns, as gains from a diversified selection of mid-cap stocks offset weakness in large-cap export and financial stocks. The strategy's allocation to Japan stood at 13.5%, significantly overweighting the benchmark's 5.0%.
Itemized Commentary:
Itemized Commentary:
The strategy's energy allocation was approximately 12.6%, significantly higher than the benchmark's 4.0%. The author noted that the energy sector is currently trading at record-high normalized free cash flow yields (according to Empirical Research Partners data).
Itemized Commentary:
Thesis (Bullish): The platinum group metals industry is a classic example of high exit barriers. Unsustainably low returns will ultimately lead to industry consolidation and capacity rationalization, presenting exciting upside opportunities. Evidence: The author recently returned from an investment trip to South Africa, visiting Sibanye Stillwater's Rustenburg platinum mine, and plans to publish a detailed report on the industry's capital cycle. Risk: The industry currently faces oversupply and low prices, but the author views this as a sign of a bottom.
Stance [Cautiously Optimistic]: The author believes that the debate over whether the Federal Reserve could achieve a "soft landing" since US interest rates peaked in August 2023 has been resolved — "it appears we are already in such a soft landing." This marks the first time since 1994 that the Fed has eased policy without a recession. China launched a $560 billion stimulus package, and global equity market capitalization is poised to surpass the October 2021 highs (according to Bank of America data). However, the author, citing Hegel and Stein's Law, reminds that short-term extrapolation will eventually give way to long-term mean reversion. Difference from Consensus: The author believes the market will gradually recognize the extent of "stretched elasticity" — UBS Holt notes that the concentration of market capitalization and value creation among mega-cap stocks is at its highest since the 1970s, while Bank of America states that 43% of the S&P 500's market cap is under antitrust investigation. Capital cycle analysis suggests that if these companies' moats are weakened, valuations will face downside.
Thesis (Bullish): The strategy is currently 24.1% underweight the US (40.1% vs. 64.2%), but nine of the top ten holdings are US-listed (except for Europe's 3i). The overall strategy trades at a forward P/E of 12.4x (benchmark: 19.4x) and a P/B of 1.4x (benchmark: 3.2x), offering a significant margin of safety. Evidence: The strategy is overweight the materials sector (approximately 13.5% vs. benchmark 4.1%), while investor allocation to commodities is at its lowest since June 2017 (according to Northern Trust). The author argues that deglobalization, nearshoring, net-zero emissions, and inflationary pressures will drive demand for "real assets." Risk: The effectiveness of China's stimulus is uncertain — the author stated, "We shall wait to see whether the recent China stimulus results in a temporary sugar rush for the market... or has a more concrete impact," meaning we will observe whether the stimulus provides a temporary boost or has a more tangible impact on economic growth. The strategy has indirect exposure to China through an overweight in Hong Kong (2.1% vs. 0.5%) and an overweight in materials, but remains offshore.
| Ticker | Direction | Author's One-Sentence View | Key Data |
|---|---|---|---|
| Wise | New Position | A cross-border payment processor benefiting from economies of scale; bullish on its business model. | None |
| Centrica | New Position | An energy utility company; bullish on its defensive characteristics. | None |
| Loma Negra | New Position | Argentina's leading cement producer; bullish on emerging market opportunities. | None |
| Platinum Group Metals Basket (Impala, Anglo American Platinum, Northam, Sibanye Stillwater, Sylvania) | Increased Position | Viewed as a capital cycle bottom opportunity; oversupply and low prices signal a trough. | ~1% of strategy |
| Nomura | Increased Position | Capitalizing on weakness after the August share price decline to add to Japanese companies. | None |
| SMFG | Increased Position | Same as above. | None |
| Hikari Tsushin | Increased Position | Same as above. | None |
| Nippon TV | Increased Position | Same as above. | None |
| Toyota Motor and Industries | Increased Position | Same as above. | None |
| Tosei | Increased Position | Same as above. | None |
| Dai Nippon | Increased Position | Same as above. | None |
| Wesco | Closed Position | Poor execution; abandoned the position. | None |
| Flex LNG | Closed Position | LNG carriers nearing delivery; outlook uncertain. | None |
| Microsoft | Reduced Position | Position adjustment; underweight contributed positively. | None |
| Alphabet | Reduced Position | Same as above. | None |
| JP Morgan | Reduced Position | Same as above. | None |
| Costco | Reduced Position | Same as above. | None |
| Elevance | Reduced Position | Same as above. | None |
| NVIDIA | Reduced Position | Same as above. | None |
| Micron | Reduced Position | Same as above. | None |
| CBRE | Hold & Watch | Fed easing policy alleviates real estate market concerns; stock price rose. | None |
| Qantas | Hold & Watch | Strong FY2024 earnings drove performance. | None |
| Suncorporation | Hold & Watch | Activist investor pressure; market recognizes value of non-core subsidiaries. | None |
| 3i | Hold & Watch | Action retail business continues to expand, validating the investment thesis. | None |
| Micron | Hold & Watch | Market fears AI spending tailwinds are short-lived; company strongly refutes. | None |
| SK Hynix | Hold & Watch | Same as above. | None |
| Samsung | Hold & Watch | Same as above. | None |
| Occidental | Hold & Watch | Energy market concerns lead to weak stock price. | Energy positions account for ~12.6% of strategy |
| ConocoPhillips | Hold & Watch | Same as above. | Same as above |
| Noble | Hold & Watch | Oil drilling company declines due to energy market impact. | Same as above |
| Seadrill | Hold & Watch | Same as above. | Same as above |
| Valaris | Hold & Watch | Same as above. | Same as above |
| Hafnia | Hold & Watch | Tanker company also underperforms. | Same as above |
| International Seaways | Hold & Watch | Same as above. | Same as above |