September saw a snap back to ‘normal’ conditions in the market, where the AI trade dominated upward movements and most other businesses declined. Indeed, all sectors of the MSCI World index were either flat or down in the month, with the exception of Information Technology and Communication Services, the latter of these propped up by Meta following the launch of its Muse AI agent. With AI-related corporate valuations being generally very high we have positioned the portfolio in a broadening range of other businesses where the valuations are cheap and the qualities fit our selective criteria. Given the market’s narrow upward focus, this meant the portfolio declined in the month.

So far this year a large majority of companies have experienced negative returns, even as the overall market has climbed higher. For those of us that like to buy low and sell high this has led to an extraordinary situation where we are able to pick up significantly above average businesses at significantly below average prices, which is a very positive set up for the future. As expected, the operational performance of these companies contrasts with the negative trends in market prices. This is set to continue with the upcoming third quarter reporting season.

In this vein, the latest addition to the portfolio is EssilorLuxottica, a re-entry having disposed of the holding early in 2025 due to valuation concerns. This is an example of a company that had previously seen its stock price bid up on enthusiasm about AI (in this case around smart glasses) only to see that turn to scepticism. The price has more than halved since its November 2025 peak. With its underlying glasses, lenses and optician business continuing to benefit from its global market dominance, the current share price and near 3% dividend yield suggests a very attractive valuation point for re-entry.

We are thus firmly in the ‘buy low’ phase for our style of investing, facilitated by a myopic market with a tantalising future opportunity should valuations revert closer to fundamentals.