Our 2 largest client holdings -Unilever and Diageo- both reported. Both tell a tale of "ice", with flat to down sales enhanced at the bottom line by capex cuts, efficiency gains and margin expansion. Some modest price rises nudged up the top line despite poor volume growth. Free cash flow yield, our prized yardstick, goes through the roof when costs are cut, so Global Autonomies (David Fuller's phrase) have the scope to make double digit dividend increases, dividends being well-covered in both cases. When you operate in a hundred different geographies, the cost cutting game can be played for a very long time indeed (Unilever has been laying off its work force for a decade without noticeable loss of efficiency, which is why governments everywhere should look to the SME sector for employment growth, and not to globally-efficient, domicile-slippery and tax-shy multinationals). 

David Fuller's view

Here is Iain Little's Fund Managers' Diary.

How many more bearish than bullish forecasts, warnings and advertisements have you read over the last six years?  Okay, there are the occasional holy fools talking about a secular bull market, but they remain heavily outnumbered by the dire bearish predictions. 

Fear sells.  We worry more about being impoverished and having to join the barbarian hoards one day, rather than holding them off at the gates as they attempt to seize our assets, achieved with the help of successful investing.

Seriously, most of the “Ice” referred to by Iain Little in his excellent Fund Manager’s Diary is due to accelerating technological innovation, which has helped Unilever, Diageo and plenty of other Autonomies to be so successful. 

You want a more personal example?  Consider your latest laptop, which has more computing power than the entire computer processing floor of a very large financial building where I worked in the mid-1960s.   

Who makes the best use of today’s technologies?  Global corporate Autonomies, because they use and profit from so many different technologies.  

Unilever is back near potential support having corrected a short-term overbought condition.  It is not cheap with an est p/e of 21.54, according to Bloomberg, but the yield is attractive at 3.57%.  Diageo has similarly corrected a short-term overbought condition, sells at an est p/e of 20.24 and yields 3.15%.  These remain investment grade positions for the long term, and you are paid to wait during lengthy consolidations of earlier gains, as we are currently seeing.