The stocks that can withstand any cycle

It’s always fascinating to draw parallels from the past to make sense of the present, and even more so when today’s market perspectives come from a global equity strategist with an academic background in history.

I asked Edinburgh-based Iain Fulton of Amova AM how investors can make sense of the cross-currents that we've got from a macroeconomic point of view. Luckily, we don’t have to go all the way back to the Battle of Bannockburn to find parallels, but instead only need to look at recent history.

Fulton’s framework comes down to one thing: quality businesses that can thrive across cycles. Watch the full interview for all of Iain’s insights and global stock picks.

This interview was filmed 27th August, 2025.

Capex driving the next leg of growth

While there are parallels between today's market concentration and that of the dot-com era, a key difference exists.

Unlike 2000, today's dominant tech companies are supported by high profitability, free cash flow, and strong returns on capital, justifying their market leadership.

Looking forward, while much of the market still focuses on consumer strength, Fulton believes we’ve entered a new cycle defined by investment rather than spending, led by the hyperscaler tech businesses.

“Hyperscaler tech businesses are investing in AI infrastructure - a 400 to 500 billion run rate of capex is an extraordinary amount.”

That’s spilling over into adjacent sectors like power and grid infrastructure, alongside significant stimulus programs in Europe.

AI investment cycle: massive spend, insignificant returns?

With the huge amounts of money being invested in AI infrastructure, each tech hyperscaler is trying to lay the groundwork to ensure its spot in the AI race.

But does the spend warrant the returns at the moment?

Fulton says that there is a tendency and a myth surrounding markets at the moment that big tech is just one homogenous asset class.

“If you look at the returns over the last couple of years, you can see there's a big spread in the performance of those companies,” he explains.

“The businesses that have delivered improving return on capital, even with this very large expansion of CapEx, have been the big outperformers.”

Nvidia (NASDAQ: NVDA) and Meta (NASDAQ: META) are two prime examples. “They’ve improved their return on capital dramatically,” Fulton noted, contrasting them with Apple (NASDAQ: AAPL) and Tesla (NASDAQ: TSLA), which have struggled to keep pace.

For Amova, Fulton says earnings and cash flow support the expenditure on AI; however, “If the return structure begins to deteriorate because we have excess capacity, then that will be much more problematic. But I don't think we're quite there just yet.”

Focus on future quality

That naturally leads to Amova’s investment philosophy, which focuses on identifying future quality companies for all of its stock picks.

“Future quality is all about high-quality businesses that can stand the test of time. So high profitability, good and improving returns on capital. That's what we look for.”

An example of a new holding:

L'Oréal (EPA: OR) - a strong leader in the beauty industry, with ongoing geographic growth for the beauty market, which tends to do better than the average staple company, and the opportunity for penetration into new markets, such as the male market.

Market share gain and pricing power

But future quality isn’t just about defensiveness. Fulton is also leaning into unique alpha drivers that can thrive regardless of the macro backdrop.

"Businesses that can take market share and have that element of pricing power are going to be very important to have around," he says. 

A case in point is Netflix (NASDAQ: NFLX).

“They’ve got 300 million subscribers worldwide. Their content continues to drive really high engagement, which gives them pricing power,” Fulton said. Importantly, the addition of advertising has “expanded the addressable market without materially increasing costs.”

“So you've got good pricing power, steady growth from your core users, a new revenue stream in advertising and all with improving margins and improving return on capital. So that's exactly the type of company we like to own in difficult economic environments.”

He also flagged healthcare as an emerging opportunity.

“There are some green shoots now, and you’re seeing quite good commentary around forward orders beginning to pick up again,” Fulton said of life sciences companies like Danaher (NYSE: DHR). “An area that’s been under pressure now has a pretty good outlook.”

Portfolio anchors, risks, and opportunities

Even as he seeks growth, Fulton emphasises the importance of portfolio anchors. “These businesses that are maybe not exciting, but they've got that good compound growth characteristic that will serve you well over the very long term.”

He names Coca-Cola Europacific Partners (NASDAQ: CCEP) as one such anchor - a company resilient enough to withstand cycles, even when more cyclical or high-growth sectors grab the limelight.

Looking ahead, Fulton highlights two forces to watch closely:

• Risk: “If [tech-driven profitability] slows down, that's been a significant engine of profit growth for the US, and that could be a definite challenge if that equation were to change. We're not seeing signs of that just yet, but it's certainly something to keep a very, very close eye on.”

• Opportunity: “The growth in anime and Japanese culture has been quite extraordinary,” Fulton said, pointing to Crunchyroll, Sony’s (NYSE: SONY) “Netflix of anime,” and the enduring success of Pokémon. For him, the expansion of intellectual property from Japan into Western markets represents a cultural and commercial trend with real momentum.

Or, as Team Rocket might put it - prepare for trouble, and make it double.

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