Here are a few important takeaways that are shaping the industrial landscape in 2023:
- Inventory Normalization: In the wake of supply chain disruptions and surging demand, 2023 saw many industries grappling with elevated inventory levels. However, the tide appears to be turning as destocking took center stage in the first half of the year. The good news? Many companies expect this trend to find resolution in the latter half of 2023, and are highly confident that destocking woes will not linger into 2024.
- Pricing Dynamics: Companies, faced with relentless cost inflation, have responded aggressively by implementing record price hikes over the past few years. Remarkably, companies across the board are fairly resolute in their ability to return to “typical” price increases throughout 2024 and beyond, with little to no concern for deflation.
- Resilience in Capital Spending: Despite the impact of higher interest rates, companies are demonstrating unwavering commitment to their capital spending strategies. Capital costs may be on the rise, and customer demand may be showing signs of softening, but this hasn’t deterred companies from pursuing their reinvestment and mergers and acquisitions (M&A)
As part of our research process, our Portfolio Managers meet with company executives, attend conferences, and engage in face-to-face interactions throughout the year. This ‘X factor’ is what truly distinguishes us, giving us unparalleled insights into companies, their operations, competitive advantages, and challenges. It’s what fuels our confidence in every investment we make.