As of writing, 94% of the portfolio (by position weight) has reported for the second calendar quarter[i]. This has been a highly encouraging reporting season both in terms of the company fundamentals and the improving narrative from the portfolio businesses.
Fundamentals
The companies within the portfolio have reported average organic revenue growth of +7.1%[ii], and average operating profit growth[iii] of +10.8%. Excluding the positive impacts of Nintendo, which is boosted significantly by the console cycle, and Clarkson, which benefitted from increased disruption in Middle East shipping, the portfolio organic revenue increased by +7.3%, and operating profit by +7.8%.
The Information Services companies, which have been (unfairly) beset by market concerns that AI will eat their lunch, battled back this quarter with positive results and clear strategies for AI monetisation. These were supported by strong evidence of adoption. RELX CEO, Erik Engstrom, announced that “90% of the value of new sales is coming from the AI-enabled platform... roughly three-quarters of the renewal value is coming from the Lexis+ with Protégé package”.Similarly, adoption of the UpToDate AI product at Wolters Kluwer has continued to accelerate, and Verisk has seen Xact AI licences increase by a factor of 10 since March (though from a low base). This corresponds with our view that the value of the service is from the data, not the AI model, and that the Information Services companies will outperform the wider market over the long term.
Other highlights
As predicted, GTT expanded its 10-year forecast for liquefied natural gas (LNG) carriers from 450 to 550 units. Gas is increasingly seen as a bridging fuel, cleaner than oil and more reliable than wind or solar, and there have been a significant amount of production expansions. Much of this gas needs to be liquefied and transported to other markets, and we foresee further increases in these estimates as shipbuilders expand their production facilities. GTT’s order book extends well beyond 2028, providing strong visibility on secured revenues while leaving room for upside as the longer-term LNG investment cycle plays out.
Diageo Investor Day: Dave Lewis, Diageo’s new CEO, laid out his vision for a turnaround at the embattled sprits company. He plans to rapidly scale Guinness and reclaim ground in the neglected ready-to-drink (premixed cocktails) market. At the same time the company has identified significant cost savings and improvements in marketing efficiencies. The road back is not easy, but there is no doubting that Lewis has energised his team and brought in new regional leadership with clear ambitions.
AbbVie remains a steady and increasingly diversified revenue growth story. Group revenues grew 10% year-on-year, led by another strong quarter from immunology, where revenues increased 15%. Skyrizi and Rinvoq grew 24% and 25% respectively, more than offsetting the decline in Humira, and providing further evidence that AbbVie has successfully transitioned its immunology franchise beyond its former blockbuster. There remains significant runway for both drugs as they continue to gain share across multiple indications. AbbVie is also reinvesting from a position of strength to extend its immunology leadership into the next decade. The proposed acquisition of Apogee adds Zumilokibart, a long-acting IL-13 antibody in late-stage development targeting large atopic dermatitis and respiratory disease markets, complementing the existing immunology portfolio.
Hasbro continues to see excellent growth within its Magic the Gathering franchise (see chart below) and announced a full slate of content for the latter half of 2026. This includes sets linked to Marvel Superheroes, The Hobbit, and Star Trek. These well-known franchises attract new players into the Magic franchise. As importantly, the company displayed excellent capital allocation discipline, cancelling production on a few of the planned video games. The company is still planning to launch some AAA games in the coming year but will only do so where they have great confidence that the game will be a success and will further build the overall Magic brand. Netflix, who successfully created a Witcher series (based on the video game), are currently working on a Magic the Gathering series. This should provide a further catalyst for player recruitment in the coming years.
And a few lowlights
CH Robinson’s results were excellent, with the tightening freight market driving higher spot rates and increased demand for brokerage services. More importantly, the results demonstrated the significant operating leverage now embedded in the business.
CH Robinson reached its mid-cycle margin targets despite freight demand remaining near cyclical lows. A 96% incremental operating margin showed how strongly additional gross profit is now dropping through to earnings following several years of productivity improvements.
However, this strong operational performance was overshadowed by an adverse legal ruling relating to an accident involving one of its contracted carriers. The extent of CH Robinson’s ultimate liability remains uncertain and there is a reasonable chance for the case to be dismissed on appeal.
Subscriber growth at the New York Times (NYT) decelerated and the management team admitted that they are seeing less traffic from the big tech platforms. The CEO, Kopit Levien, clearly set out the four reasons why he expects NYT will thrive despite the challenge. Its products sit in large categories with daily, engagement - current events, sports, cooking, games and shopping. It continues to fund original, independent reporting at scale while most publishers and broadcasters retreat, making the work “increasingly rare and valuable”. It has a long record of using technology to deliver journalism in whatever format audiences want. Finally, NYT has multiple complementary revenue streams that provide several ways to monetise that engagement. We also foresee increased subscriptions as the US enters the mid-terms in November.
Honeywell Aerospace reported their first quarter as an independent company following their recent spin out. The company have experienced delays in the supply chain, with one carrying $15-16m of past dues that gates “hundreds of millions of dollars of revenue output”. Roughly 2% of over 3,000 suppliers are critical or constrained and Honeywell are acting to correct this. Capital is being redirected into supply - 4x the prior-year spend on multi-sourcing and in-sourcing, supplier tooling doubling from 2025 to 2027 with c.70% aimed at castings, over 50 suppliers second-sourced in H1 and 50 more planned. This is a common occurrence in the highly regulated aerospace industry, but it is pleasing to see that the new management team are immediately addressing the problem, something that would likely have been far more cumbersome in the conglomerate structure.
Consensus stat attack[iv]
For the 29 companies out of 30 reported (Clarkson has no sell-side consensus, there are currently 33 portfolio companies):
- Reported revenue: 22/29 beat consensus, with seven beating by 2% or more. Top outperformers: Nintendo (15% beat), CH Robinson (12%), Hasbro (6%). None of the seven misses were by more than 2%.
- Reported operating profit: 25/29 beat consensus, with six beating by 5% or more. Top outperformers: Nintendo (95% beat!), Amazon (14%), Hasbro (12%), CH Robinson (9%), Lindt (9%), Booking (9%). With only one missing by 5% or more, and only Honeywell Aerospace (-13%) significantly negative – though it should be noted that sell-side coverage of the stock is thin following the spin out.
Quote of the quarter
Geoff Sprecher (CEO of Intercontinental Exchange) when asked if AI would displace software:
“The answer to the view that a frontier model will commoditize software like ours: It has the direction backwards. The model is the commodity. The key is the governed network of record, its role-based permission map, and the behavioral data that only it holds, none of which a model owns and all of which it needs to be useful. AI does not shrink that advantage. It widens the surface area where our network creates value.”
Portfolio outlook
The portfolio valuation opportunity remains excellent, with a forward free cash flow yield of 5.5%[v] and double-digit growth expected to continue. Both are far above the expectations for the wider market. The portfolio companies continue to return cash to shareholders aggressively in this valuation environment.
With a combined dividend and buyback yield on the portfolio of over 5%, the potential for valuations rerating upwards in second half is great and we would expect attractive total returns to follow.
Chris E, Cristina, and the Evenlode Team
7 August 2026
