MANTRA forces create investment themes

We think mass affluence, new technology, restructuring and aging will continue to be the forces driving global growth.

We opened the Invesco Oppenheimer International Growth Fund nearly 25 years ago. From the beginning, we have thought about four major forces that we refer to by the acronym MANTRA: Mass Affluence, New Technology and Aging are constantly Restructuring the world’s economy. The continual interplay of these forces produce fundamental, long term growth in demand for some things, while causing it to ebb, slowly and inexorably, for others.

One example, from early last century, is the rise of the automobile and the decline of the horse for human transportation: demand for tires rose while that for buggy whips declined. An example in the early part of this century is the growing demand for online shopping, and the pressure that has put on brick-and-mortar retailers: demand for warehouse fulfillment technology is rising while that for retail floorspace is not. Those structural trends in demand growth are investment themes for us. We look for companies that we believe can monetize them, profitably and sustainably, over the long term. We buy them at prices that we believe can yield attractive returns and then hold them in our portfolio for many years to allow those returns to compound and create wealth potential for our investors.

Mass affluence

Mass affluence, a major force for the past 30 years, is the increase in wealth in the world, driven to a significant amount by the development of the emerging markets. This force supports our portfolio’s “Bread, Booze and Bling” theme. We own branded producers of processed food, cosmetics and soft drinks, as well as brewers and convenience stores. It supports our luxury theme holdings:  three companies strong pricing power in a segment of the industry with very high barriers to entry for any new competitors.

New technology

New technology is the powerful force underlying our largest investment theme, the data deluge. The global use, transmission and storage of data continues to soar, as exemplified by the volume in global mobile traffic, which is expected to increase by 56% per year through 2030.1 Within this growth stream we are invested in the themes of software as a service and the semiconductor value chain, which are driven by our accelerating move online in both our personal and business lives. We’re invested in the theme of ecommerce, in companies at the retailing, fulfillment and payment points in that value chain, and we own three companies in our mobile gaming theme.

Restructuring

Restructuring is not only a force, it can also be an investment theme, as companies restructure themselves to remain relevant. One of our top holdings is a company that is shaping itself into a more focused, profitable entity by finally shedding operations that have been undergoing secular decline for many years. In our opinion, restructuring opportunities will be rising as companies respond to the short-term significant hit to many, many businesses caused by the coronavirus, and to the acceleration in many structural trends that it has caused.

Aging

Aging is not only the most inevitable force in MANTRA. It is also the most predictable.  We are very, very confident of where demographic trends are headed. The population of the entire planet, including emerging markets, is aging at a relentless rate,2 and that fact is creating new opportunities for businesses that cater to this growing group of people. This force, in combination with the rising affluence of emerging market consumers, supports demand growth in several of our investment themes, particularly those related to health care, including scaled heath care, corrective lenses, biologic building blocks. They also support growth in one of the few trends that has been recently interrupted rather than accelerated, which is our air travel investment theme. It will be some time before this trend resumes. But, human nature being what it is, we are confident that it will and, with our minimum three- to five-year time horizon, we are patient investors.

In summary, these MANTRA forces of Mass Affluence, New Technology and Aging continue to Restructure our economy, creating long-term trends of growth and decline. Some of these growth trends have accelerated and some have slowed down, but they continue to support the investment themes in our portfolio.

1 Source: The paper by Katrodiya, Renil. (2019). A Survey on 6th generation, citing global mobile traffic from the International Telecommunication Union.

2 Source: United Nations World Population Ageing report, 2019

Important Information:

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In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.

The risks of investing in securities of foreign issuers, including emerging market issuers, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.

Stocks of small and mid-sized companies tend to be more vulnerable to adverse developments, may be more volatile, and may be illiquid or restricted as to resale.

Growth stocks tend to be more sensitive to changes in their earnings and can be more volatile.

The Fund is subject to certain other risks. Please see the current prospectus for more information regarding the risks associated with an investment in the Fund.

Before investing, investors should carefully read the prospectus and/or summary prospectus and carefully consider the investment objectives, risks, charges and expenses. For this and more complete information about the fund(s), investors should ask their advisors for a prospectus/summary prospectus or visit invesco.com/fundprospectus.

The opinions referenced above are those of the authors as of June 12, 2020. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial advisor/financial consultant before making any investment decisions. Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state tax laws are complex and constantly changing. Investors should always consult their own legal or tax professional for information concerning their individual situation. The opinions expressed are those of the authors, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.

George Evans is the Chief Investment Officer of Global Equities for Invesco. He joined Invesco when the firm combined with OppenheimerFunds in 2019.

Prior to joining OppenheimerFunds in 1990, Mr. Evans served for three years as a securities analyst and portfolio manager in the international equities department at Brown Brothers Harriman.

Mr. Evans earned a BA and MA degree from Oxford University and an MBA from The Wharton School of the University of Pennsylvania. He is a Chartered Financial Analyst® (CFA) charterholder.

Alice Fricke serves as a Senior Client Portfolio Manager on the Global Equity team, working with institutional clients to explain the team’s investment philosophy, process, and performance.

Ms. Fricke joined Invesco when the firm combined with OppenheimerFunds in 2019. She was previously a senior client portfolio manager on the global equity team at OppenheimerFunds from 2011 to 2019. During most of her career, Ms. Fricke has focused on the Asian and European equity markets. She began her career as a banker resident in Asia with Deutsche Bank and, after returning to the US, covered the equity markets as an institutional stockbroker and analyst at various firms.

Ms. Fricke earned a BA degree in political science and French from Virginia Tech. She is a Chartered Financial Analyst® (CFA) charterholder and holds the Series 7 and 63 registrations.

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