Rise of Luxury Experiences: Why Travelers Are Choosing Memories Over Material Goods

Rise of Luxury Experiences: Why Travelers Are Choosing Memories Over Material Good

Performance of luxury experience companies versus the S&P Global Luxury Index highlighting the growth of experiential luxury.

Luxury spending has long been associated with the purchase of high-end products such as designer handbags, watches and jewellery. Yet consumer preferences are evolving. Increasingly, luxury is being defined not only by what people own, but by what they experience. Travel, wellness, personalised services and cultural enrichment have become powerful drivers of spending among affluent consumers.

Since the pandemic, this shift has accelerated. Travellers are placing greater value on meaningful experiences, personal well-being and memorable journeys. Luxury tourism revenues have already surpassed pre-pandemic levels, supported by strong demand for premium hotels, cruises and wellness retreats. Industry estimates suggest that the global luxury travel market reached approximately $1.6 trillion in 2025 and is expected to continue growing at high-single-digit rates for the foreseeable future.

Financial Markets Are Reflecting the Trend

The impact of this shift extends beyond consumer behaviour and is increasingly visible in financial markets. As illustrated in this month’s chart, companies exposed to luxury travel, hospitality and wellness experiences have significantly outperformed the broader luxury sector over the past two years, suggesting investors are recognising the strength and durability of this structural trend.

Viking Holdings: Travel as an Experience

One of the clearest beneficiaries of this trend is Viking Holdings. Unlike traditional cruise operators focused on mass-market entertainment, Viking has built its brand around destination-focused travel experiences designed for affluent travellers seeking enrichment and discovery.

The company reported revenue growth of nearly 22% in 2025, reaching $6.5 billion, while maintaining occupancy levels of around 95%. To address rising demand, Viking plans to add 27 new river ships by 2028 and 10 additional ocean ships by 2031. These investments reflect management’s confidence that demand for experiential and destination-oriented travel will remain strong.

Premium Hospitality Continues to Expand

The same trend can be observed across the luxury hotel industry.

Hilton now operates more than 500 luxury properties across brands including Waldorf Astoria, Conrad and NoMad, while continuing to expand its flagship destinations in key markets. Marriott, through brands such as Ritz-Carlton, St. Regis and JW Marriott, continues to benefit from strong global demand for premium accommodation and exclusive travel experiences. With nearly 1.8 million rooms worldwide and more than 600,000 rooms in its development pipeline, Marriott is investing heavily to capture future growth.

Both companies have highlighted a growing preference for personalised service, exclusive destinations and memorable experiences as travellers choose to spend more on unique journeys and premium hospitality.

Wellness Becomes a Core Luxury Category

Beyond transportation and accommodation, wellness has become one of the most important pillars of the luxury experience economy.

This creates a significant opportunity for OneSpaWorld, the leading provider of wellness services onboard cruise ships and at resort destinations. The company operates more than 200 wellness centres, serves over 28 million cruise guests annually and controls more than 90% of the outsourced maritime wellness market. In 2025, OneSpaWorld generated record revenue of approximately $961 million, supported by growing demand for fitness programmes, nutrition services, medi-spa treatments and broader wellness-focused experiences.

Perhaps most importantly, wellness is increasingly viewed as an integral component of luxury travel rather than an optional add-on. Consumers are seeking experiences that contribute not only to enjoyment, but also to personal well-being.

The Future of Luxury

Taken together, the success of Viking, Hilton, Marriott and OneSpaWorld highlights a profound shift in luxury consumption.

Luxury goods remain an important part of the market. However, some of the strongest growth is now coming from experiences that offer discovery, wellness and personal enrichment. Both high-net-worth individuals and younger affluent consumers are prioritising travel, cultural experiences and self-care over the acquisition of additional material possessions.

The implication is clear: the future of luxury may be defined less by what people own and more by where they go, what they experience and how those experiences enrich their lives.

Written by Maria Hernandez Sanchez

Download PDF version: Chart of the Month_September 2026

This content is provided for information purposes only and does not constitute investment advice, an offer, solicitation or recommendation to buy or sell any financial instrument or investment product.

The views and opinions expressed are those of NS PARTNERS SA at the date of publication and may change without notice. References to specific securities, sectors or market developments are provided for illustrative purposes only and should not be interpreted as investment recommendations or investment research.

Past performance does not predict future returns. The value of investments and the income derived from them may fluctuate and investors may not recover the amount originally invested. Investments involve risks, including possible loss of capital.

References to market indices, benchmarks or other measures of relative market performance are provided for information purposes only. NS PARTNERS SA makes reasonable efforts to ensure the accuracy of the information contained herein but provides no warranty or representation as to its completeness or accuracy.

Some entities of the NS Partners Group or their clients may hold positions in the financial instruments mentioned or may act as advisor to related issuers.

This content may not be distributed or used in any jurisdiction where such distribution or use would be contrary to local laws or regulations. Additional information is available upon request.

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Chart of the month: Bubble or Bull? Why not a Bubbull?

Bubble or Bull? Why not a Bubbull?

The current mindset in the investment community is rather binary when it comes to the S&P 500. Either people speak about a bubbly market about to collapse, or about a steady and strong-footed bull market thanks to the AI cycle.

It is honestly difficult to bet the farm on the first or on the latter. US equities, and consequently global equities, as the US makes up roughly 70% of the MSCI World, are supported by impressive profit growth from its leaders, almost all technology related. At the same time, the strong performance recorded by the S&P 500 came with a significant increase in valuations, which are now close to the highest levels of the last 25 years, and getting closer to the late 90s tech bubble.

We, at NS Partners, are as torn between optimism and skepticism as the other market participants. The merits of the big Information Technology leaders and their exposure to AI are undeniable; likewise, their immense profit and cash-flow generation are nothing short of impressive. But, at the same time, valuations matter; they always did and will always do. And today valuations are very demanding; not outrageous, but very demanding. And we see many signs of speculative positioning all around the place, like the lofty returns posted by numerous non-profitable businesses.

The chart of the month shows 100 years of history for the S&P 500. If the latter might appear overextended at this point, reflecting its spectacular run of the last 10 years, it is by no means a call for a fall. The pattern was quite similar in the mid-90s, right before it literally shot up to the upside before the infamous tech bubble finally burst. Being absent from equities back then, before the collapse, was very painful.

We must admit visibility is very limited at this point. The bull market is here and well alive, while we witness flashing lights as we observe multiple bubbly signals in the current environment. A bubble and a bull? Let’s call this a Bubbull for now…

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.
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Chart of the month: US economic consensus 2025 less good than expected

US economic consensus 2025 less good than expected

Donald Trump’s November 2024 election victory sparked optimism for a revitalized US economy, with expectations of good GDP growth and a reduction in the hefty budget deficit inherited from the Biden administration. Equity markets soared after Election Day, signaling confidence in Trump’s economic agenda. The initial Bloomberg Consensus for 2025 projected GDP growth at 2.2%, with hopes of fiscal discipline to tackle the long-standing deficit challenge.

Yet, Trump’s tariff obsession, marked by “Tariffs Day” in April 2025, defied David Ricardo’s free trade principles, creating a lose-lose scenario. The updated 2025 consensus reveals a GDP growth drop to 1.4% and a core PCE inflation spike to 3.0%, reflecting expected short-term inflationary pressures. This tariff-driven approach has disrupted global trade, stifled growth, decreased corporate profits and raised consumer costs, undermining the early economic optimism.

The situation deteriorated further with the first draft of Trump’s “Big Beautiful Bill,” which unexpectedly widened the budget deficit disappointing investors who anticipated fiscal restraint. While tariff revenues may partially offset the deficit, the bill has hampered DOGE’s (Department of Government Efficiency) efforts to curb spending. Rising concerns over sustained borrowing have caught the attention of bond vigilantes, pushing US 30-year government bond yields to 5.0%.

The 2025 consensus now paints a less rosy picture: GDP growth at 1.4%, higher inflation (set to ease in 12-18 months), and a persistent -6.5% budget deficit. This has weakened the dollar, driven interest rates higher, left equity markets flat, and fueled uncertainty among consumers and corporations.

However, Trump has shown a willingness to pivot when needed, so we may see tariff reductions and a revised “Big Beautiful Bill” that better aligns with market expectations, potentially easing some of these economic strains.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.
© NS Partners Group

Time to perform differently – Global Macro

Time to perform differently: Global macro

Markets are shifting, and fast. Since late 2024, volatility’s up and equities are struggling. But global macro strategies? They’re thriving. Same returns, less risk. Half the volatility, negative correlation, and real resilience. At Haussmann, we now allocate over 25% to macro. Why? Because when markets get unstable, macro performs. It’s time to think differently and perform differently.

Cédric Dingens, Head of Alternative Investments

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.
© NS Partners Group

Chart of the month: Time to perform differently – Global Macro

Time to perform differently: Global macro

In our previous “Chart of the Month” from September 2024, titled “Time to Reassess Market Risks,” we noted early signs of fragility in global market structures. Since then, markets have trended lower and become more volatile, driven primarily by Trump’s trade war and persistent geopolitical tensions.

By late 2024, one of our strongest convictions was the growing attractiveness of global macro strategies. These managers generate returns by identifying broad economic and political trends, such as shifts in interest rates, inflation, currency dynamics or global risk factors, and positioning portfolios accordingly across a diverse set of asset classes, including equities, bonds, currencies and commodities.

The accompanying chart highlights the performance and volatility of our global macro managers in Haussmann versus the MSCI World Index since 2020. While the equity market returned an impressive +55% over that period, our macro managers delivered comparable performance, with far greater resilience.

Crucially, the rolling volatility of the global macro strategy was roughly half that of equity markets and significantly more stable. Whereas market volatility peaked near 30%, macro volatility rarely exceeded 10%. From a portfolio construction standpoint, this is compelling: the strategy’s correlation to equities was only 0.18 and its downside capture was -7%, meaning it generally performed positively during equity market drawdowns.

Today, global macro represents more than 25% of Haussmann’s capital allocation. We take confidence in the long-standing strength of our top three macro allocations: Caxton, Castle Hook and Gemsstock which have been part of our portfolio for many years.

We are now operating in a market environment that is increasingly macro-driven. Trade tensions and tariff-related uncertainty continue to suppress risk appetite and heighten volatility. While we are not advocating an exit from equities, positive surprises remain possible, we strongly believe this is the time to complement portfolios with strategies that offer greater resilience and positive convexity.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.
© NS Partners Group

Chart of the Month: April 2025 Inflation & Yield Curve Risks

Chart of the Month:
Inflation and the Yield Curve This Chart of the Month examines whether inflation is truly transitory and what the recent steepening of the US yield curve signals for markets.

April 2025 Inflation & Yield Curve – Chart of the Month

Is the inflation transitory this time?

At the press conference after the last FED meeting on Wednesday 19th of March, FED chairman Jerome Powell, used the infamous T word to describe the impact that tariff would have on inflation in the short term. While he could well be right, the use of the term “transitory” for describing inflation was very bold as it revives fresh memories of what is probably the worst monetary policy mistake of this decade.

The FED preferred measure for inflation, the core PCE price index (the dark blue line in the chart) was at 2.8% in February on a year over year basis. This level is not alarming in itself. What is more concerning however is that the inflation has not made further progress since May last year (as reflected by the dark blue arrow on the chart) while still being above the 2% FED target.

As the US growth is showing some signs of weakness and the FED made it clear that they view the recent elevated inflation numbers as only a short-term impact from tariffs, the bond market is pricing 3 FED cuts for the year, which would take the FED fund rate at 3.75% in December.

What does it mean for future inflation and the yield curve? Since the start of the year, the inflation expectations one year from now (the light blue line in the chart) has rebounded from 5% to 6.2% as consumers are getting worried of price hikes. Since inflations expectations tend to be self-fulfilling prophecies, this could trigger an upshot in the core PCE price index.

The yield curve can be approximated by the difference between the 10-year nominal yield and the 2-year nominal yield (the dark grey line in the chart). This measure has gone from -36 bps to +32 bps since last May when disinflation progresses stalled (as shown by the dark grey arrow). And as one of the major drivers for its slope is the inflation uncertainty, we could be witnessing the start of a bear steepening, where the 10-year nominal yield rises faster than the 2-year yield.

This is very important because we have seen previously that a steepening yield curve tend to lead to credit spreads widening (which started this year) and ultimately recessions. While we are not calling for a recession in the US just yet, it is becoming a greater risk amid political uncertainty.

Therefore, stay careful with your credit exposure and watch out for the curve steepening!

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.
© NS Partners Group

Chart of the month: Asia, the alpha opportunity

Asia: the alpha opportunity

Source: Morgan Stanley Fund Services, MSCI

Since the onset of COVID-19, dispersion in the US and Asia has significantly increased, with Asia continuing to show higher levels. This accounts for the superior performance of Long/Short strategies in recent years, especially in Asia, where there are more opportunities to go long on high performers and short underperformers, allowing these strategies materialize in stock returns.

Over the past decade, Asia’s expanding market size, liquidity, and sector depth have led to a greater diversity in returns, providing an often-overlooked source of alpha opportunities. Many stocks remain under-researched or misunderstood due to local barriers such as language, culture, and regulations. Historically, Asia was seen as a growth market, with cyclical foreign investor flows mainly chasing market beta. However, Asian markets are now evolving into a diverse investment landscape, where fundamental stock selection is becoming increasingly rewarding.

The return composition of Asian equities is becoming more alpha-driven, with stock selection playing an increasing critical role. This is essential in an environment where performance bifurcation within industries has become more pronounced. Following a period of systematic beta decline, markets are now finding strong support levels. Concurrently, improved policy clarity and stability in the economy are boosting confidence in stock selection, allowing investors to focus more on fundamentals rather than tail-end events.

Our strategy: the equity Long/Short multi-manager approach offers the right diversification for investors looking to reallocate capital to the region. Managers have been performing well this year. Since we began investing in the region, we’ve had the opportunity to allocate capital to managers who have successfully protected capital during downturns while generating strong returns in rising markets, benefiting from good asymmetric returns.

The regional market structure is shifting from beta-driven to alpha-driven opportunities. To capitalize on this, we must quickly adapt to the new investment environment with an agile approach. Managers using a Variable Net hedge fund approach provide the necessary flexibility. Overall, we favor active investments over passive ones. Passive investments, such as ETFs, fail to capture the new economic trends, while active long-only funds are less dynamic in adjusting exposure to the right sectors to seize market opportunities.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.
© NS Partners Group

Chart of the month: From safe haven to power play: the Swiss market unleashed

From safe haven to power play: the Swiss market unleashed

Switzerland is globally renowned for its breathtaking landscapes, world-class ski resorts, and prestigious watchmaking industry. However, beyond its scenic beauty, Switzerland boasts world-leading companies in niche industries and stands as a safe haven with untapped potential. It offers a compelling opportunity for investors seeking stability and long-term growth, supported by resilient market fundamentals and a strong economic framework.

In recent years, investors have heavily concentrated their portfolios in the U.S. technology sector, particularly in the “Magnificent 7.” However, the recent AI-driven “red wave” has highlighted the risks of overconcentration. The market’s reaction to DeepSeek’s debut served as a stark reminder of how quickly sentiment can shift, underscoring the importance of diversification. In this context, Swiss equities present a compelling opportunity. Known for their strong balance sheets and earnings growth, Swiss companies provide exposure to high-value niche industries. The Swiss market, by nature, has shown a defensive character over time, with key sectors including consumer staples, insurance, utilities, and pharmaceuticals accounting for more than half of its market composition. Post-DeepSeek turbulence, the Swiss market’s defensive qualities shine even brighter.

Since the beginning of the year, Swiss indices have outperformed global peers, with the Swiss Market Index posting impressive gains of 8.59% in January. Demonstrating resilience on January 27th. Adding defensive position remains a time-tested strategy, amid persistent volatility and uncertainty in global markets. Swiss blue chips such as Nestlé, Roche, and Novartis continue to serve as cornerstone holdings for stability-focused portfolios. However, the true opportunity may lie beyond these household names. While large-cap Swiss stocks attract the most attention, mid-cap companies represent a largely untapped growth avenue. Mid-caps, often in their expansion phases, offer significant growth potential backed by strong fundamentals. That said, careful valuation assessments are essential to mitigate risks related to liquidity constraints and premium pricing.

Recent market movements have not disrupted the positive trajectory of several Swiss stocks, with double-digit gains in key names such as Cie Financiere Richemont, Logitech, UBS, Roche, and Partners Group. But also, gems like Galderma, Sandoz Straumann, Swissquote, Comet, Sulzer and Belimo.

Switzerland’s monetary policy remains supportive of economic growth. The Swiss National Bank is likely to maintain a dovish stance, with the potential for lower or even negative interest rates. Such a policy environment provides an additional tailwind for Swiss equities, particularly for export-oriented firms.

For investors seeking a blend of diversification, stability, innovation, and growth, Swiss equities offer a compelling solution. In today’s unpredictable market environment, having a solid Swiss allocation may not just be a luxury—it might be a necessity.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.
© NS Partners Group

Chart of the Month: Data Centers and the AI Gold Rush

Data centers are at the heart of the AI revolution — but who are the real winners?
Are you familiar with the name Sam Brannan?

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Sam Brannan is frequently cited as California’s first millionaire, during the famous Gold Rush of the 19^th century. And guess what? He has never dug in the ground or sifted mud in order to find the precious gold nuggets everybody was desperately thriving for.

How did he manage to make a fortune, while staying warm, dry and clean-handed?

Well, he simply was able to sell what gold prospectors needed to try to extract the shiny stuff: picks, shovels and sieves. 300’000 people rushed in California to find gold, most of them in 1849, which gave rise to the moniker “the San Francisco 49ers”. And most of them became Brannan’s clients, eventually.

Fast forward in the 21^st century, we witness a data collection and analysis rush, with the unstoppable emergence of data centers. In this context, we can easily identify the “data collectors”, like Microsoft, Apple, Amazon, Alphabet or Meta, among others

They must relentlessly invest in hardware to digest these gigantic amounts of data aimed at feeding their Artificial Intelligence ambitions. But these data centers generate high levels of heat, and therefore absolutely need cooling to function properly.

This is where a group of companies, the “data centers coolers”, come into action. Companies like Vertiv, Trane Technologies, Johnson Controls International, Lennox or Carrier provide big tech with indispensable cooling solutions.

As shown on the chart of the month, an equal weighted basket of these 5 stocks has vastly outperformed an equal weighted basket composed of Microsoft, Apple, Amazon, Alphabet and Meta in 2024.

And this confirms that, each time a big investment theme arises, the largest beneficiaries can be found well beyond the usual suspects everybody thinks about at first glance. And that’s good news: we know that the Magnificent-7 capex will be massive the next few years. And many companies will benefit from it. Heating, Ventilation and Air Conditioning stocks are just one example; from Building Materials to Energy Producers or Utility service providers, there are plenty of opportunities for good stock picking that should last for a while. It is time to be curious and look for other long-term winners in this AI craze.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.
© NS Partners Group

Chart of the month – Stock dispersion or the essence of long short equity investing

Stock dispersion or the essence of long short equity investing

Stock dispersion creates an ideal environment for long-short equity strategies. When there’s a wide range of performance among individual stocks, it provides more opportunities to identify and exploit mispricing.

Different stocks can be mispriced relative to each other. Stock dispersion allows you to take advantage of these mispricing by going long on undervalued stocks and short on overvalued ones.

Risk Management helps in managing idiosyncratic risks (risks specific to individual stocks). If one stock faces unexpected issues, the impact on your overall portfolio is mitigated by gains in other stocks.

Long-short strategies aim to generate alpha (excess returns over the market). By identifying and investing in undervalued stocks (long) and shorting overvalued stocks, you can enhance returns.

Stock dispersion helps in achieving a market-neutral position, where the portfolio is less affected by overall market movements and more by the relative performance of the stocks.

Measuring stock dispersion in the market involves assessing the variability in returns among different stocks. Here are some common methods:

Standard Deviation: Calculate the standard deviation of returns for a group of stocks. This measures the average deviation of each stock’s return from the mean return of the group.

Cross-Sectional Standard Deviation: This involves calculating the standard deviation of returns across all stocks in a given period. It’s a direct measure of how much individual stock returns differ from the average return.

Beta: Measure the beta of each stock relative to a benchmark index (e.g., S&P 500). Beta indicates how much a stock’s return moves relative to the market. A higher beta means more dispersion.

Alpha: Calculate the alpha of each stock, which measures the stock’s return relative to its expected return based on its beta. Alpha indicates the stock’s performance relative to the market.

Range of Returns: Look at the range between the highest and lowest returns within a group of stocks. This simple measure gives a quick sense of dispersion.

Interquartile Range (IQR): This measures the range between the 25th and 75th percentiles of stock returns, providing a sense of the middle spread of returns.

Dispersion Index: Some indices, like the S&P 500, have dispersion indices that measure the variability of returns among the index components12.

These methods help investors understand the degree of variability in stock returns, which is crucial for long-short strategies aiming to exploit mispricing.

Before picking your next hedge fund manager, have a look at the investment universe he is involved in and see whether there is a favorable environment to generate Alpha from idiosyncratic risks (hedge fund 101) … especially if the manager is dedicated to a limited number of sectors or a sector specialist…

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.
© NS Partners Group

Rise of Luxury Experiences: Why Travelers Are Choosing Memories Over Material Goods