Equity markets have been increasingly shaped by enthusiasm around artificial intelligence, concentrated leadership, and a willingness to reward risk. For many quality investors, that environment has been challenging. But GMO’s Quality Strategy has sought to balance participation in AI-related upside with the discipline that defines quality investing: owning durable businesses, maintaining valuation awareness, and seeking resilience through market cycles.
In this brief video, Tom Hancock, Portfolio Manager of the Quality Strategy at GMO, discusses the current opportunity set across quality equities. He highlights how the team is approaching AI beneficiaries, select software companies affected by broad disruption concerns, and health care businesses that may benefit from innovation, demographic demand, and an improving regulatory backdrop.
Watch the video to hear Tom’s perspective on today’s quality opportunity set and how GMO is positioning for a market shaped by AI enthusiasm, sector dispersion, and macro uncertainty.
Quality Investing for a More Concentrated, AI-Driven Market
Key takeaways:
- Quality remains relevant in uncertain markets. GMO believes high-quality companies with durable business models can compound over time while offering potential resilience during downturns.
- AI creates opportunities beyond the obvious winners. The team is focused on businesses positioned to benefit from AI without relying on overly narrow assumptions about which technologies or applications will ultimately dominate.
- Broad selloffs may create select opportunities. In areas such as software, GMO sees cases where concerns about disruption may be overdone, particularly for companies with proprietary data, regulatory lock-in, or deep vertical expertise.
- Health care remains an area of interest. Innovation, demographics, and improving regulatory concerns may create opportunities across select health care subsectors.
- Valuation discipline matters. GMO’s approach combines business quality with valuation awareness to seek conservative participation in long-term equity opportunities.