Americans are known for being ultra-chirpy at the worst of times, but the mood in the US today goes way beyond that.
In May, I went on a whirlwind trip across four states to see how the country was really doing.
News sites and brokers constantly feed certain narratives to us depending on the story of the day; I wanted to see the whole bubbling truth.
I went to the US with a positive outlook. I returned, somehow, even more confident and with a number of promising candidates for our portfolios.
To me, the business cycle doesn’t seem to be about to turn downwards.
The main risk is probably a monetary policy mis-step by the Federal Reserve; however, company managers are relaxed about the gradual path currently set out.
I was surprised and encouraged to hear that most of the companies we spoke with were using tax-cut windfalls to invest in their businesses and give bonuses or pay rises to their employees: the ‘trickle-down’ effect working in practice.
Managers were keen to increase capex to support growth, an attitude that is less popular with companies in the UK and Europe.
Once I returned, we were quick to buy US Bancorp, the fifth-largest lender in the US. Its place at the top of the second stratum of the American financial world is actually quite positive.
It doesn’t have any of the investment banking divisions that make the large firms so volatile (and profitable), but Bancorp still has the scale to serve both the people and the businesses on main streets across the Midwest – the mix is about 50/50.
It also delivers a best-in-class return on equity of 13.4 per cent.
You have probably realised that we are more upbeat on working class America than the average manager. We bought US Bancorp soon after our meeting because we felt it was in a great position to capitalise on this grass-roots improvement in the US economy.
Another company that persuaded me on my travels was chemical manufacturer Ecolab.
The largest portion of its business is supplying cleaning products for the restaurant and food industries, but it also supplies water treatment facilities, hotels and hospitals.
This isn’t just truckloads of bleach. Ecolab is designing hardtops that actively kill bacteria and dangerous microbes for food processors. It is making extremely efficient cleaning agents that need only a fraction of the water previously used.
Ecolab’s chemicals reduce an industrial dishwasher cycle to one minute. Compare that to your one at home.
What attracted us was its customer-driven philosophy. By constantly improving the products and service it offers, Ecolab saves money for its clients even as it raises its own prices.
Still, its products are about 20 per cent more expensive than rivals’, so if innovation hits a rough patch – or competitors catch up – there’s a risk that it starts to lose customers and pricing power.