As we start the year, we would like to share some of our expectations for markets, industries and the companies we invest in.
Our World Stars Global Equity strategy finished the year +21.4% in US dollars, strong absolute performance and well ahead of the MSCI World. We were optimistic this time last year but did not expect the Covid-19 pandemic to have the impact it has had. Our approach to invest in quality and value for the long-term has allowed us to weather the crisis and to generate significant value.
While we are deeply concerned about the pandemic and the impact it has on all of us, we believe that we will overcome it and are optimistic again this year. We believe that vaccinations will work and could allow reopening faster than markets expect.The vaccine development effort is the single most positive outcome of a horrible year.
Even as the current second/third wave of the Covid-19 pandemic is forcing governments to move into strict lockdowns and the vaccines are rolled out we must remember that the shutdowns are not intended to protect the average population. Their purpose is to make sure healthcare systems are not overwhelmed. The critical issue is the capacity of healthcare systems to provide the necessary care to those who need it. Severe outcomes, hospitalization and deaths disproportionally affect vulnerable populations, the elderly and those with pre-existing conditions. Exposure, quarantine and illness for healthcare workers mean that staff shortages have a far greater impact on capacity than lack of equipment or beds, which can be addressed with investment after all.
Among all the atrocious newsflow we must keep two basic facts in mind: The vaccines work and there are enough doses to cover vulnerable populations and healthcare workers so healthcare systems are not overwhelmed. It is entirely possible that the US and Europe will achieve this by the end of the March. Within weeks and months we should see healthcare capacity improving and complications, hospitalizations and deaths (but not infections) declining. Governments will be in a position to reopen schools, businesses and economies. There will be complications and delays (in particular the uncertainty about the effectiveness of the vaccines on all variants of the virus), but reopening does not require vaccination of the entire population and could happen faster than markets expect.
That is why we believe the opportunity is now. We have every chance of overcoming the pandemic, the business fundamentals of the companies we invest in are strong, the digital platforms and other businesses that have done well will continue to do so and the consumer, healthcare and industrial companies that have been held back will rebound strongly. Governments and their fiscal and monetary policy will be supportive, rates will stay low and inflation will mean that companies with growth and pricing power, and assets with scarcity, will do well. There is significant cash on the sidelines and while markets have been strong the rally took many by surprise. The opportunity is now for investors to buy some of the greatest companies in the world at a point when their businesses will improve, their comps will be easy and their valuations are attractive.