Animal Spirits Podcast - Talk Your Book: International Growth Investing

Episode Date: December 25, 2023

On this episode, Michael Batnick and Ben Carlson are joined by Todd Morris, International Growth Portfolio Manager and Analyst for Polen Capital to discuss: reasons for the valuation discrepancies between international stocks and US stocks, how the dollar affects international investments, understanding cultural differences when investing outside the US, position sizing within a concentrated portfolio, and much more! Find complete show notes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Past performance is not indicative of future results. The material discussed has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Books brought to you by Poland Capital. Go to polencapital.com. It's p-o-l-l-en-capital.com to learn more about their international growth strategy. Polandcapital.com. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Riddholz wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast.

On today's show, we're joined by Todd Morris to talk about international growth stocks. It's been a while since international stocks have had their day in the sun. as global investors are painfully aware of at this point. J.P. Morgan does this great chart book in The Guide to the Markets on the show, the different regimes of international and U.S. outperformance. And really, for 40 years, it was international outperformed for a few years. And then the U.S. took the baton and then back and forth and back and forth. And the longest period of outperformance prior to the most recent one lasted 6.2 years.

It was the U.S. I performed for six years. I'm sorry, it was seven years, my bad. This recent stretch, it's been 14 years, but, at least according to J.B. Morgan, that stretches over because international stocks have out performed for the last 1.9 years. So is this a fake out or is this a real deal, Ben? I mean, it gets to a lot of the things that people are worried about where it's all technology. That's the difference, right?

You could say there's differences between the way that those companies are run or regulations and rules. I'm sure that's part of it, too. but the big piece is that technology is just such a greater way here. And I've never really heard a good explanation as to why all of the biggest best technology companies are in the U.S. I've yet to, right? Is it, I don't know if it's a risk thing. No, it's we, oh, so like why do we have Silicon Valley?

Yeah, why do we produce the best tech companies? Because, I don't know, people say our education system is broken and we're falling behind in these areas, yet we continue to innovate and produce the biggest best companies. Why is that? I've never heard a good explanation. I'm generalizing. I'm certainly not an expert in these matters.

But are we more capitalist-oriented? Do we not have as many social safety yet? Are we encourage risk-taking? It's like just in the five-book of our DNA. I don't know. The risk side of things. So two things can be true. One of them is that the U.S. has earned the valuation premium

that it's traded at for the last cost. a couple of decades. It could also be true that maybe it's gone too far. And of course, we'll find out. The 20-year average PE ratio for the SP 500, and none of this matters over the short term. I mean, that should be obvious to anybody listening. But it's 15 times for the S&P over the last 20 years, 15.6, and now it's 19. Acquixus has traded at 13 times historically, and now it's 12.5. But if you look at the difference between the two, it's trading at two standard deviations below the norm in terms of how cheap international stocks are based on price to earnings ratio. And the chart looks the same. If you look at the difference relative to the U.S.,

right? Yeah. If you look at the difference of dividend yields, it's the same type of thing. So the gap is wide and widening. And what's going to knock the two off course? Well, that's what makes this game fun. And nobody knows that's the answer to that. And that's one of those things that only we could talk, we could speculate, but really, really, only time will tell. So with no further ado, here is our conversation on international growth investing with Todd Morris from Poland Capital. We're joined today by Todd Morris. Todd is an analyst and lead portfolio manager of the international growth strategy at Poland Capital. Todd, welcome to the show. Thanks, guys. Great to be here.

All right. I don't want to start the show off with a dad joke, but is international growth an oxymor on these days? Because it seems like all the growth has come from the U.S., and most of that is technology. So I don't want to start to show off on a sour note, but why hasn't there been more growth for international stocks in the recent years? But I guess pretty much since, I don't know, the 2008 crisis is over. It seems like there hasn't been as much growth there. It's a fair question. And I would note that, you know, since the global financial crisis, we've really seen the U.S. markets take off, supported by, of course, lower rates and whatnot. But tech is a very Silicon Valley-centric marketplace and part of the markets.

So it stands to reason that with tech leading this charge over the last 10-plus years, the international markets have fallen behind. But it doesn't mean they should be left for dead. And I think that's probably where this conversation will end up going. But we have a lot of optimism around the trajectory for international from where we stand today. So when you think about the world and constructing portfolios, sometimes the MAC regime is very much in the background. And you always have to be aware of it.

Sometimes it impacts the portfolio more than others. Maybe sometimes it impacts decision making more than others. 2022 and 2023, certainly macro is not in the background. It was very much at the forefront. How do you all incorporate those headwinds and hopefully they turn to the tailwinds into how you think about structuring your portfolio? Sure. I mean, macro is something you have to be aware of.

You can't ignore it. I think there was an effort by some of the compounders of the world to sort of say it's irrelevant or not necessary to be part of your process. We need to be thoughtful about it. But at the end of the day, we are fundamentally based investors. So we're focused first on the strength of the businesses we're making investments in, understanding the quality, the capability of their businesses to continue to drive growth over the long run. And then secondarily, macro comes into it where my co-PM, Daniel, and I will spend time thinking about the attributes of a, of a business. business and how it might stand the test of time, given our long time horizon as investors. We're looking to make investments over the next three, five, ideally even longer years

from here forward. So let me ask a follow up to that. So, of course, the higher interest rates impacts, impact stock prices, probably growth, not probably growth companies more so than others. But at the fundamental level, the cost of capital, that's not, that's a real thing, right? Like these companies have interest payments and all the sorts of stuff. So are you adjusting your models based off of things like that? So cost of capital is a very important consideration.

And it's also a big headwind to companies that do use excess or external capital. Many of our companies don't. And so that's one of the attributes we use as investors at Poland is to be focused on quality businesses that have the ability to grow their earnings faster than the market over the long run. And when we do that, we often find businesses that are using internally generated cash to drive their growth investments, which makes them less beholden to, external capital, and therefore they're able to drive consistent growth despite the interest rate backdrop.

So one of the things that we've been hearing about international markets for years is just that, listen, yes, they've underperformer. They're also way cheaper than U.S. markets. Now, I'm curious, a two-part question, I guess. How much cheaper are you finding these companies to be? And then how much of that is just sectoral differences where the, I think, tech makes up 30% of the S&P versus 8% or 9% of the EFA, if that's your universe? So how much that is just the technology piece and how much of it is that shares of international

stocks are pretty darn cheap right now? So, I mean, international is absolutely cheaper versus the U.S. marketplace. We use the AQUIX-U.S. index for our strategy. And I think that there is likely to be a closing of the alligator jaws over time from here. So I think partly due to what we talked about at the beginning of the conversation, where U.S. and tech specifically has done so well for so long. you've seen these valuations in the U.S. to just kind of trend higher over the last decade plus. Our thinking here is that we're likely to see that reverse at some point soon.

I don't know when, and I can't tell you how it's going to take place, but I can look at history and see that there's a few examples that do kind of shine a light on how things kind of come together to enable international outperformance versus U.S. How important is Michael mentioned macro factors? How is important is the dollars? Because the dollar's been stronger than I think anyone would have realized since 2008. typically, especially from the perspective of U.S. investor, a stronger dollar is a headwind for international investors because of the currency piece. Is it as simple as something like that? If the dollar

were to weaken, that would be just a good thing for international performance? I think that's one of the criteria. And that, again, I think aligns with what we're talking about when we look at history, right? So you can look at the 1990s or the 1960s as periods similar to where we are today, where you had extended stretches of U.S. outperformance vis-vis international. And what you saw at the ends of those runs was in a risk-off moment, you get the dollar ripping higher. But then on the far side of that, right, so post-2001 and the 9-11 recession, etc., you then saw an extended period of dollar weakening, and that did, in fact, correspond with international outperformance versus U.S.

We're proponents of global investing. the U.S. is not guaranteed to dominate for ever and ever. In fact, if you look at on a dollar basis, like so from the viewpoint of a U.S. investor, the growth of a dollar from the S&P 500 and I don't if it's AQUIXUS, but basically non-U.S. From 1970 to 2011, they tracked, they ended up at the same spot over a 40-year period. And then, of course, over the last decade plus, there's been a massive divergence and the reasons for that are well-known. Not to be too like a meta here, but you said that you invest in companies or you try to invest in companies that grow their earnings faster than just an index, than the average of all companies. What is your explanation for why companies

with higher earnings growth tend to do better. Like, how does share prices converge with fundamentals? And I know that's like a really, really difficult, poetic sort of type of question. But in your opinion, like, what causes those two things to diverge? I'm sorry, to converge. I think that this kind of gets to the philosophy we use at Poland Capital. So David Poland, just to give a little bit of context here, started what is now our U.S. track record in the late 1980s. And he'd been on Wall Street for a number of decades. He started

off as a broker and then became an RIA and ultimately launched our strategy. But he tried his hand at many different styles of investing. He'd done deep value. He'd done momentum. And at the end of the day, he looked around, he said in the mid-80s, I see the S&P 500 has returned about 10% per annum over the long run. And that's comprised basically of, you know, six to eight percentage points of earnings and then a few percentage points of dividend. And we'll just ignore. evaluation for the conversation here. But roughly speaking, he's saying those are the constituents that drive your 10% returns. And he said, what if I built a portfolio that is geared for growth that is just generally faster across a cycle? Should I not expect to see the returns that that

portfolio generates correspond to the earnings growth? And that's sort of like the founding principle of our firm, right? So build your portfolio for faster growth in US dollars and expect to see that over the long run, that's a decent likelihood of being the driver of share prices. Earnings growth drive share prices over time. That's really the entering assumption we're using. And so in that case, you're, correct me if I'm wrong, you're less a stock analyst and really more of a business analyst because in order to be confident in a business's trajectory, you have to know the competitive landscape.

You have to know the customers. You have to know the stakeholders. I mean, you really have to understand the business landscape. That's exactly right. And that to us is emblematic of the quality label that many, I know many users, many investors use the quality label out there, but to us, quality is sort of essential as a component of what we're doing. And you're absolutely right to say it's a business analysis process, not a stock analysis process. I'm curious where you're finding growth these days, whether it be your top holdings

or the sectors, where is the biggest earnings growth coming from international stocks these days? Sure. So we've got a decent exposure to actually many of the same types of sector allocations that we have in our U.S. strategy too. But just to kind of rattle off a few, we've got a good allocation to health care. We've got a number of services companies in the portfolio. We do have some technology businesses as well, both hard tech and hard tech would be in the semiconductor capital equipment category and then also software businesses. So we have similarities to our U.S. portfolio here as well. So I'm curious to learn a little bit about your process. How much of this is quantitative versus qualitative? Are you looking at financial statements? Are you boots on the ground? Like, are you, what does what does the analysis really look like? Sure, sure. It's a little bit of all those things. So we start off with the quantitative screen that takes account of returns on invested capital, balance sheet strength, margin structure, growth profile. We're looking for real organic revenue growth. And interestingly to me, when you put together just our sort of our five

guard rolls, as we call them, that eliminates from consideration almost 90% of stocks in one shot, which is sort of interesting. Sorry, what's the, what's the universe there for that? You said that Aquex U.S. How many stocks is that? Sure, Aquex has about 2,300 stocks in it in that category. And so we take that list and then want to be sensitive to to remove companies that we think are benefiting from trends or fads that may not be sustainable over a full cycle because we want to be long-term business owner-oriented investors. And then we spend a lot of our time. The vast majority of our time is analysts getting to know businesses, understanding the competitive landscape and thinking critically about, okay, if a business has generated high returns on a

trailing basis, that's usually a signal to us that there's something about that business that is unique. That would be a competitive advantage or a moat to some investors. We want to understand the viability and the vitality of that moat, how long is it likely to endure? And then if it will endure, what sort of growth rate might be implied for the business based on those assumptions and thinking through the size of the addressable market and competitive considerations? So these companies share their financials with you four times a year. And in between those 90-day periods, I'm curious what sort of other things you guys are doing and looking at and part two to that question is what what outside of the quantum like what does

the quant screen not pick up on so sorry for the two part question sure so so we're we're basically as business analysts we're constantly on the lookout for information and we're also afforded the luxury of taking our time to get to know other businesses in our universe and in our in our research process but it's an iterative thing right so i i i am fond of remembering walter schloss and his contention that you don't know a stock until you're in a stock, right? So we're always learning. You're always getting to know the business more. And of course, the landscape is constantly evolving. Competition is always coming to nip at the heels of your businesses. So there's a lot to what we're doing on an ongoing basis. And then the second part of your

question, can you remind me again? What does the quant screen not pick up? Tell me a little bit more about the squishier side of the equation. Sure, sure. So the softer side of investment is getting to know a business's management team, getting to know the culture of the business, and understanding many of the aspects around the competitive landscape, right? So it's a competitive world out there. If a business earns high returns in one year but does not enjoy competitive differentiation, then it's very likely that its competitive set, its peer group should replicate whatever it did to achieve that high return in one year and arbitrage away the high returns. And so we need to understand those aspects, which are not going to jump off the page at you. And I'll give you,

you an example on a trailing one-year basis. So like for years in the 2010 decade, the energy patch was kind of, you know, more of a, it was left for dead. And then last year, they had a surge in profits. So at a certain point in time this year, our screen showed, hey, look at these very high return generative businesses, tremendous profit growth, but you know it at their core, they're very cyclical businesses. So that snapshot in time will not, will not give you that information every time to look at it. This is a little harder to quantify as well, but how different are companies in different countries? Because there has to obviously be a cultural difference.

So how hard is that to wrap your brain around? Because that's got to be part of the difference between international and U.S. stocks as well, is just the cultural differences. Sure. No, it's an important part of what we do. And one of the fun and interesting aspects of the job is to travel and to get to know these companies and to experience them. We do, interestingly, to me, have great access to businesses all over the world. being based in South Florida, as I'm sure you're all aware with your client base in the Northeast, we're getting more and more businesses in our industry moving to Florida.

And so as management teams make the rounds on the East Coast, they spend a day in Boston, they spend two days in New York, they come down to the Miami area, and we get good access to them in our office, which is an interesting development that we've watched to take place. And then secondarily, because of forums like this, where you can engage with management teams over the internet, we have the latitude to talk to folks all over the world. and can really canvass the entire globe in one day from the comfort of our office. So there's that aspect as well. But I will say, candidly, that it is interesting to get to know these businesses and to go out

and have interactions with the management teams in person. Have the mega-cap tech stocks in the United States crowded out potential competitors? In other words, is there the Amazon equivalent in Europe, the Facebook equivalent in Europe, or is it, is Facebook in Europe, Facebook? Is Google Google? So I think in many cases, those companies are very well entrenched in their respective businesses, but that does not mean that there's not an opportunity to go at other parts of the business world and build great competitively advantaged companies that have the ability to grow at above market rates for a very long time. So it looks to me like your portfolio is pretty concentrated.

I think what the top 10 names make up 60% of the portfolio? Yes. Something like that? It's a 26 stock portfolio. How do you work on position sizing then? Do you go all in? Do you dip a toe in the water? How do you think about that in terms of building up a position size?

Sure. So we typically start a new position at somewhere between 1.5 and 2.5%. And we'll watch the business as it progresses over the following few quarters and build that position up as we build our conviction and see that it's trending in the direction we thought it would be going. So a full-size position for us could be anywhere between 2.5. half and six percent at cost. You will see companies in our portfolio exceed that six percent weight, but they've gotten there by appreciating faster than the rest of our portfolio.

So today we have two companies that are right around 10 percentage points. That's ICON PLC, which is an Irish business, and SAGE Group, which is a UK-based software company. Are you more likely to sell because you think something's gotten so ahead of itself that even in three years, it can't grow into that, or because the news just is deteriorating rapidly? Are you more likely to sell on the way up or the way down, I guess? That's an interesting question to kind of consider, because you'd really need to dig into specific companies to give a granular answer. But typically, the most important reason why we sell is out of concern for competitive positioning. So when we think through our quality lens,

we're basically building an investment case around the durability of the competitive advantage. And if that comes under threat, that is the most important reason why we would sell a business. But there are other reasons to sell. And your point there, Michael, with, if the valuation has run so far that our forward-looking return has been subdued, we will sell. And we've done that before. That's another example. And alternatively, we may just find better ideas that really fit into the portfolio as superior alternatives to those which we're in right now. So maybe a better way to quantify where I was going, Todd. Or just an additional question. What's the portfolio? What's a turnover for the portfolio?

Oh, okay. I got you. So our portfolio's turnover has been, we're going on seven years. At the end of 23, it'll be a seven year track record. So it's been in the low teens. But I think a good barometer to highlight would be our U.S. track records, which will turn 35 years of age at the end of 2023. And that has averaged 20 to 25 percent turnover. In both cases, we're talking about a long long duration time horizon here, which I think is truly an edge to us. Because the world, as we all know, is getting shorter and shorter term in its focus. And so by bringing an owner mindset and trying to be more strategic in our thinking and our interpretation of news events, I think it helps us to kind of stay the course with many of our investments. I'm curious, like, what are the

fundamentals of the business that you're investing? This is a general question. But if there are companies that have a similar growth rate where you're investing versus companies in the United States, are they still trading in a significant discount or is it not as much as I would think? Well, they can be. No, they definitely can be. And an easy barometer would be to highlight the fact that, you know, the international index that we use is, I think it's probably six or seven turns cheaper than the S&P 500 now. And I think that that type of discount is similarly applicable in many cases to the companies in our portfolio versus a similarly geared portfolio in the U.S.

And so I think there is a case to be made that there's a good discount. Do you pay attention to any of the big fad narratives going on right now? AI is obviously one of them, some of these weight loss drugs or other ones. Is that stuff that you have to care about or do you wait until it shows up in the companies that you are looking at?

I mean, it's come up over the course of time, frankly. We've been talking to companies about AI. I remember going to China and hearing about AI in 2017. So it's a thing that's out there, but it's certainly reached a fever pitch after the, what was it, the Nvidia announcement in May, I believe it got this whole thing started this year. We'd been having conversations about AI

with companies earlier this year. And it kind of, I guess from an infrastructure standpoint, NVIDIA kind of set the world on fire earlier this year. We have exposure to AI through a number of different holdings. right? So we own in the semi-cap complex, we own ASML and Laser Tech, both of which have niche monopolies in providing technologies that are literally existential. They're essential to TSM's ability to print leading-edge chips. So without the machines that are sold by ASML and laser tech, there would be no TSM printing three nanometer chips, which are going to

NVIDIA. We own many software companies in the portfolio, each of which are talking about ways that they can leverage AI to be of greater use to their customers over time. And I want to be clear here, we're talking about time. It's not like this is relevant today. Right. So Sage Group is this UK-based company. It's our second largest holding. They make small business accounting and payroll software for companies that typically have 10 to 250 employees. And so this is basic blocking and tackling mission critical software, but they're talking about building AI capabilities so that in 10 years, if I'm a small business owner and I use Sage's software, they'll have interesting bots that can help me accomplish HR tasks.

So maybe I don't need five or 10 HR employees. I need one or two HR employees, right? So there's ways in which AI is entering the conversation for companies in software. And then lastly, we have services companies. Accenture and Globant are both systems integrators. And so they're helping companies leverage AI to make their businesses home a little bit smoother. We own Novo Nordisk as well on the GLP1 side. And then we have some other med tech companies, Siemens Health and Hears and Medtronic,

which are, they've been left for dead, arguably, in terms of valuation. And so we've actually added to Medtronic recently during this, this GLP1 boom. How much of the potential growth in these companies is related to the region in which they operate? Like, is it possible that if Europe, and I don't know the numbers, I'm making this up, But if Europe's growing at one to two percent, could these companies grow at 30 percent? It's a great question. And it's important to note because we are large-cap investors. So many of the companies we have investments in are globally oriented businesses.

So they're generating sales all over the world. And they can grow far faster, right? So Sage Group's an example. We think this business is now poised to grow its earnings at a mid-teens or higher rate. And they're based in the UK, right? So absolutely is the answer to the question. And that gets us back. And this is where my excitement.

comes from as an international PM, squaring that reflection with the David Pollan Insight from the 1980s, which is, can I build my portfolio to grow at a rate that's faster than the benchmark? Well, guess what? The benchmark in international is slower growing than the U.S. market's benchmark. So the delta for our portfolio growing at a mid-teens rate to the index is even bigger in international than it would be in the U.S. So what are the kind of funds that you offer to investors? Is this just separately managed accounts? Are there mutual funds as well ETS? How does this work? Yes. So high net worth and institutional clients will use separate accounts and we're affiliated with a number of platforms in that offering. We also have mutual funds,

which are mirror image, and we have use its funds for offshore clients as well. So all of those structures invest in the exact same portfolio. So same holdings and the same weightings for those respective funds. Todd, you spent seven years in the Navy. Thank you for your service. How did you how did you get into the financial services industry? Thank you for that, Michael. I always wanted to be a portfolio manager from an early age. I went to the Naval Academy and incurred an obligation to serve, so I spent seven years on active duty after college. And so I wanted to make this transition to this career field when my obligation was fulfilled and was lucky enough to attend Columbia Business School to make that transition. So Columbia helped me make the switch to learn

about investing, and then found my way to pulling capital soon after graduation. Wait, I thought Columbia brainwashes you to be a value investor, though. How did you get to grow? We actually have about, I'd say, at least half our team came from value backgrounds. And to include David Pullen, I'd throw him in there, too, as mentioned, he was, at one point, he tried his hand at deep value investing. So there's a few of us that have done that as well. And I will say this. Everyone has those scars. Yeah, exactly, right? So it just kind of comes in my experience, it was about four or five, six months in at the firm. It just kind of hits you. I was fortunate to work with David Pullen for a year and a half before we passed away. And we're in a

meeting and we're just talking about any, I can't remember which specific business it was, but it sort of hits you. And you're like, man, it actually, it seems so straightforward. It actually is that straightforward. It's just buy great businesses, assemble the portfolio to grow faster than the markets and think long term. And it's much harder to do in practice than it is to talk about with this bulletized list. But that is essentially the philosophy. Todd, one area that we didn't get to that I wanted to was financials, which are a pretty big part of either EFA XUS or AQXUS, whatever. What's your general take on financial services, specifically through the lens of like a growth investor, a lot of money came into the fintech space and,

you know, a firm and Klarna and just Square and so many others that were going to disrupt traditional financial services. And what, I mean, is the verdict out? Was that, was that just a failure or where do you, where do you think the landscape is there? On the newfangled fintech stuff, I feel like every cycle, there's some version of that. There's some version of, of call it a new evolutionary take on how to extend credit to consumers. And so I don't feel like this experience was unique in that it happened, but maybe just the flavor of the day was a little bit different than prior experiences. But we think that there are some good businesses in the financials category. And interestingly, when you go to the emerging markets, sometimes among the most

competitively advantaged things you'll find would be a bank that does extend credit to businesses and to consumers. So we have some exposures to financials, whether it be through Aon or through HDFC Bank, which is the largest private sector bank in India. But we think that there are opportunities to make investments in that category. But you're right to note that it is a significant part of the benchmarks when you go outside the United States. Well, here's another question.

And the final one for me that you might not have a good answer on because it's, I'm asking you to guess. What do you think would have to happen? If we're looking back in 10 years, for some of the wild divergences in valuation that we've seen between U.S. and international companies, what do you think would have to happen for them to close? Because, or even, let's, you know, for the gap to narrow, there needs to be a catalyst. Now, valuation might make the catalyst a little bit easier. Right.

Right? Because there's just such a gap between the two. What's your best guess? I mean, it's a fun question because you could really take it in many different ways. I agree the valuation at some point could become a catalyst in and of itself. And I don't know if that means that the international marketplace has to see a surge in valuations or the U.S. market needs to sort of de-rate back down to the rest of world. I don't know how that reconciles.

And then historically, the question to me conjures up what's going on away from markets as well as thinking through markets themselves. because I do feel like we're seeing populism on the run here. And I don't think that's going to change. I think that's inherently inflationary. And so maybe there's a catalyst that comes out of populism all over the world. All right. Well, that's a great place to leave it.

Todd, where can we said people to learn more about your strategies? Polandcapital.com is the website. So you can check us out there. All right. Awesome. Appreciate your time. Thank you. Thank you. Okay, thanks again to Todd.

Maybe you can check it out, polencapital.com. To learn more, email us, Animal Spirits at the compound news.com.