2 global stocks Canopy believes are positioned for long-run compounding

For much of the past decade, global equity conversations have tended to gravitate back to the same point: the U.S. remains the centre of the universe. 

Its dominance in technology, innovation, and market liquidity has made it the default allocation for many investors and, in recent years, the default source of returns. But when every cycle stretches a narrative to its limits, the real opportunities often emerge in less obvious places.

Across recent conversations with international managers, this theme has kept resurfacing: while U.S. megacaps have delivered extraordinary performance, the most fertile ground for future returns may lie outside the headlines, and increasingly, outside America. 

One manager that has been particularly sharp on this point is Canopy Investors, a team of global small and mid-cap specialists with a long history of finding compounders outside the noise of the mega-cap tech complex. 

Their philosophy is grounded not in top-down calls, but in a simple question: where are quality companies growing, compounding, and trading at valuations that still reward long-term investors?

In speaking with Co-Founders Kris Webster and Michael Poulsen, it became clear that the U.S. market’s recent leadership has been far narrower than most investors appreciate and that this narrowness has obscured entire pockets of genuine value.  

“There are high-quality companies with long histories of sales and earnings growth that have been left behind simply because they lack exposure to hyper-growth thematics.”

In the discussion that follows, we explore where Canopy is currently finding the most compelling opportunities, both within a fragmented U.S. market and across international regions such as Japan, Europe and the UK. 

We break down their views on valuation extremes, overlooked quality, structural reforms abroad, and the stock ideas they believe offer the best risk-reward for long-term global investors.

The narrowness of recent U.S. equity leadership

Webster and Poulsen begin by highlighting that the recent strength in U.S. equities has been unusually concentrated. 

“The U.S. ‘SMID’ market has been driven by a relatively narrow group of companies in more nascent and speculative areas: AI, defence, new satellite constellations, cryptocurrencies, quantum computing, and meme stocks.” 

Much of this performance, they note, has been fuelled by retail activity and “thematic, often leveraged, ETFs,” rather than broad-based earnings-supported growth.

They stress that this is not representative of the overall market. "The median company has not participated in recent price appreciation to the same extent,” they point out, a divergence that raises questions about the durability of the rally.

At a factor level, the skew has been even more striking. “High-volatility stocks are currently outperforming, despite share price volatility being a poor predictor of long-term returns,” they say. 

Meanwhile, the factor that has historically delivered the most consistent long-term outperformance, quality, has been noticeably absent from the rally. As they put it plainly, “quality, a proven long-term return driver, has been the biggest laggard.”

For patient stock pickers, this growing disconnect between speculative enthusiasm and fundamentals is creating an increasingly attractive opportunity set.

Portfolio positioning: staying selective, not reactive 

While parts of the US market look stretched, Canopy Investors emphasises that their exposure is highly targeted rather than broad-based. Instead of making top-down allocation calls, they continue to focus on pockets of genuine value inside the U.S., while increasingly finding opportunities abroad.

As they explain, “we have not made material shifts in our US allocation,” but this is because their US positions are concentrated in very specific market segments that still offer compelling fundamentals. 

With a portfolio of only 30 stocks, the team has the flexibility to avoid the speculative areas driving much of the US rally. 

“We invest in about 30 stocks, not the whole market, allowing us to be selective.”

This selectivity enables them to focus on the companies they believe are most mispriced: “high-quality companies with long histories of sales and earnings growth” that have been overlooked amid the frenzy around AI and other hyper-growth narratives.

They also point to a second group of opportunities, U.S. companies whose share prices have sold off due to short-term or thematic headwinds rather than a deterioration in fundamentals. As they put it, “we’re also finding opportunities among quality companies whose shares have fallen sharply due to temporary earnings disappointments or unfavourable AI narratives.”

At the same time, they are finding an expanding opportunity set outside the US, particularly in Japan, Europe and the UK. Across both US and international markets, their process remains firmly bottom-up: valuation discipline and business fundamentals, not geographic preferences, guide where capital is deployed.

Where value still exists in a stretched U.S. market

They do not dismiss concerns about U.S. valuations. As Webster and Poulsen explain, 

“The U.S. currently has a two-speed stock market: AI/speculative stocks versus everything else.” 

The speculative side dominated by AI, cryptocurrencies, defence technology, quantum computing and thematic ETFs, shows clear signs of excess and expectations that require “flawless execution.”

By contrast, the rest of the market contains many companies that have been largely ignored. As they note, “many stocks are clearly overvalued and/or detached from fundamentals… but among the latter, we’re finding many attractive opportunities in companies ignored by the thematic frenzy.”

Importantly, they believe that valuation risk is concentrated, not universal. A pullback in the speculative pockets of the market would not, in their view, automatically translate into broader market weakness. “It’s possible for speculative areas to correct while overlooked quality stocks regain ground, without a broader market sell-off,” they argue.

Their base case is that the normalisation of hype-driven segments may actually benefit quality companies, which have lagged despite strong fundamentals and more reasonable valuations.

Where the global opportunities are emerging

Beyond the US, Canopy Investors is finding compelling opportunities across Western Europe, Canada and Japan, but the team emphasises that their approach is always bottom-up. 

“We find opportunities by focusing on individual companies rather than getting distracted by the macro.”

France is a good illustration of this philosophy. Despite difficult headlines including “high debt and unsustainable deficits, political dysfunction, [and] limited monetary flexibility due to Euro membership.” They have identified several companies that are fundamentally mispriced. Many, they note, “generate most of their revenue outside France, [yet] are nonetheless trading at attractive valuations.”

Japan, however, stands out even more for structural reasons. The country has shifted meaningfully after decades of stagnation. As Webster and Poulsen explain, “the government and regulators have pushed boards to improve corporate governance and adopt shareholder-friendly policies.” Combined with the return of growth and inflation “for the first time in decades,” this has created what they see as one of the most attractive global hunting grounds for stock pickers.

For them, these dynamics translate into “opportunities in quality growth companies trading at steep discounts versus comparable US-listed peers.”

Two global ideas they like right now

The team highlights two current high-conviction opportunities, one in Japan and one in the UK.

Visional (TSE: 4194) - Japan

Canopy points to Visional, the founder-led operator of BizReach, as a clear beneficiary of Japan’s structural shift toward greater job mobility. “Visional operates BizReach, an online recruitment service matching experienced professionals with companies.” 

What makes this so powerful is the changing behaviour in Japan’s labour market. “Unlike the U.S., where changing jobs mid-career is common, Japan has historically had very low job mobility,” they note, but this is now changing as a shrinking workforce gives employees more leverage.

BizReach is positioned squarely in front of this evolution, having “grown its sales and earnings over 20% annually for the last five years.” At a valuation they describe as “a low-20s PE multiple,” the team believes Visional offers attractive long-term value.

Wise (LON: WISE) - UK

Their second idea is Wise, a founder-led global money transfer service transforming the economics of cross-border payments. “Wise is a founder-led money transfer service helping people and small businesses send money internationally.” 

The company’s competitive edge is rooted in its infrastructure: “Traditional banks are slow and expensive because they use outdated correspondent banking networks. In contrast, Wise built its own payment infrastructure… allowing it to transfer money faster and more cheaply than banks.”

Despite profitability and a significant global footprint, Wise still has enormous room to grow. The team notes that it “serves less than 1% of its potential market,” which, in their view, supports a long runway for sustained expansion.

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