Second Quarter 2025

However, investing with a global opportunity set has been at the core of NGA’s investment philosophy since our inception, and that has never wavered. The exposure to domestic companies undoubtedly makes up an overwhelming majority of our portfolios and likely always will. Yet, we have always stood by the belief that the U.S. does not have a monopoly on great ideas and great companies. Rather, great companies exist all over the world, and we should do our best to unearth them on behalf of our clients. In fact, there are foreign companies with products and/or services that we cannot access in the U.S. Examples of unique businesses include semiconductor fabrication plants, biotech focused on human plasma, and distribution of bitumen used in the construction of roads in Africa.

This is why we have travelled over 300,000 cumulative miles across the globe to discover new attractive investment opportunities and with one main goal in mind. Irrespective of domicile, we want to invest in companies with products and/or services that will experience growing demand. Growing demand leads to expanding sales and earnings. Expanding earnings drives stock prices higher over long periods of time and ultimately provides an adequate risk-adjusted return for our clients. That is the #1 goal of investing in equities—domestically or internationally.

There are other secondary reasons to invest in international stocks, however, and they are on full display this year. Diversification is the main ancillary benefit of owning foreign securities. As we mentioned above, we are largely looking for foreign companies with exposures and drivers that may not necessarily be available domestically, which by design adds diversification to client portfolios. But on a much larger scale, companies outside the U.S. can be exposed to different monetary policies, economic cycles, and/or fiscal programs. As an example, Europe has pledged to step up its own defense spending in response to a combination of factors such as the proximity of Russia’s war on Ukraine, decades of underinvestment in defense, and potential shifts in priorities of traditional allies. As a result, we have seen Euro-area defense companies rally 71% year-to-date versus 27% for U.S. defense companies.2

All diversification means is that the performance between U.S. and non-U.S. markets can ying and yang, ebb and flow. Ultimately that provides consistency and smoothness of long-term results. This minimization of volatility is particularly valuable in times of stress.

For the last 15 years, international markets have been mostly “ebbing” and U.S. equities have mostly been “flowing.” But 2025 has brought about a tangible change. Perhaps a bit confounding given all the negative global headlines, international stocks are the best performing asset class year-to-date, up 18%, whereas U.S. stocks are up only 6%.3 As the chart depicts, that is International’s largest outperformance since 2009. There appear to be some tectonic shifts in motion, but it is not yet clear whether this is the end of this cycle’s American exceptionalism. If performance between the U.S. and non-U.S. markets normalizes to a more balanced state, we will be delighted to have our international exposures in client portfolios.

Naples Global Advisors remains committed to traveling the globe to perform our boots-on-the-ground research in pursuit of companies that can provide adequate risk-adjusted returns, diversification, and/or a hedge. In fact, we are already making our preparations for a trip to the Land Down Under in the second half of this year. We feel it is our duty to go that extra mile on your behalf, whether it’s through our thoughtful investment research and portfolio management, our unbiased financial advice, or our dedicated service.