Fund Manager Comments on Inflation/Valuation Risks, Meta Platforms & Bank of America

(Free on Substack) Reading Materials (META US, BAC US)

A version of this was also published on my Twitter account.

Introduction: Below are some fund manager comments that we find of interest, on managing inflation/valuations risks (Troy), Meta Platforms (Bronte) and Bank of America (Artisan).

Manage Risk By How Much You Own, Not What You Own

We start off with some comments on valuation from Troy founder/CIO Sebastian Lyon and his Trojan Fund co-manager Charlotte Yonge, potentially as a riposte to Terry Smith and his Fundsmith H1 2022 letter highlighted last week.

Smith wrote that "the best defence against this inflation is a high gross margin" and that "we do not invest on the basis of our prognostications about macroeconomics". Fundsmith is of course well-known for holding many high-quality but also high-multiple stocks. By contrast, Lyon and Yonge opined that:

“History informs us that valuations fall as inflation rises. Some argue that companies with pricing power and high gross margins can protect investors from the effect of inflation … Th…