Potential resilience in a high-tariff environment: Mid Wynd International

Mid Wynd International (MWY) offers exposure to ‘compounders’, which are companies that can consistently generate high returns on capital and reinvest the cash they generate into their businesses to support future growth. Managers Louis Florentin-Lee, Barnaby Wilson, and Alistair Boyle aim to invest in companies with these characteristics when their shares trade at reasonable valuations, and to hold them for the long term.

Since the start of the year, the managers have reduced their exposure to semiconductor-related companies such as Taiwan Semiconductor Manufacturing Company (TSMC) and ASML. This was to manage their size in the Portfolio, as they have rallied strongly on the back of the build-out of AI infrastructure. Conversely, they have added to their positions in software businesses and introduced new holdings, such as financial technology firm Intuit. Many of these companies sold off in early 2026 as their business models have been seen as vulnerable to the rise of AI. However, the team believes these concerns may be excessive, as many of these companies benefit from competitive advantages that are hard to replicate.

The team has also initiated new positions in businesses they expect to benefit from secular growth trends. AutoZone, a US auto parts retailer, is one example. The managers expect it to gain from the ageing vehicle fleet in North America, rising miles driven, and increasing vehicle complexity.

In FY 2026, MWY increased its Dividend for a 14th consecutive year, strengthening its position among the AIC’s next generation of dividend heroes, while offering a historic yield of c. 1%. The board also continued its share buyback programme at an elevated pace, helping to maintain a narrow Discount, which currently stands at c. 2%.

While the AI driven market environment has proven difficult for MWY to navigate, as it has for many active strategies, we believe now could offer an attractive entry point in the trust. This is because its holdings are currently trading, in aggregate, at valuation levels last seen during the global financial crisis, which could provide scope for a rebound.

The managers believe that the market is wrong in its assessment of some “AI losers” as they think a broad-brush approach has been applied to a swathe of names, despite some of them having strong cash flows, recurring revenue streams, and competitive moats. They think these characteristics may prompt investors to eventually reassess the merits of companies in other parts of the market, with MWY providing exposure to a broad range of return drivers. In our view, the trust could also prove attractive in more difficult macroeconomic environments, such as those characterised by low growth and/or tight financing conditions. This is because the managers focus on companies with low capital intensity, recurring demand, and durable competitive advantages, which mean they should offer resilience in more challenging periods.

Finally, we note that the team has remained committed to its investment principles despite the headwinds, even when it might have been tempting for an active manager to change their approach and chase recent winners. To us, this demonstrates integrity and consistency. As such, we believe MWY can continue to serve as a vehicle for gaining exposure to high-quality companies.