INSIGHTS

On November 24, 2025

AAM Viewpoints — Bulldog Investing for Adverse Market Conditions

Current market conditions provide an optimal environment for Bulldog investing, in our opinion, given our focus on companies that compete effectively in high growth sectors.

Bulldogs are companies that are well capitalized, have dominant market positions, and are intensely focused on taking market share. We believe these companies are positioned to dominate or disrupt their competition through a combination of financial strength, innovation, economies of scale, product or service differentiation, and management talent.

Three major factors contribute to the current phase of global uncertainty for companies in our investable universe. Firstly, technologies like generative AI and quantum computing are driving unprecedented change. Secondly, the global tariff war that has intensified through 2025 has become a catalyst for reshoring industrial capacity and manufacturing worldwide. Finally, the post-Cold War order is again dominated by superpower competition and regional conflict. The net effect of these forces is hyper-competition for markets and resources. In the age of disruption, growth is driven by a company’s ability to innovate and adapt. These companies, which we call Bulldogs, may have an edge and often attain premium valuations versus their peers.

In previous decades, central banks implemented policies leading to zero interest rates and aggressive quantitative easing to manage extreme boom-bust cycles. This elongated the typical expansion period of the business cycle and shortened periods of stagnation and financial disruption. Those days may be over, and it appears that we are entering into a period where governments are starting to crowd out public investments and private consumption. Interest rates at the longer end of the yield curve may remain higher given the unsustainable level of government indebtedness which pushes rates higher at the long end. In our opinion, the weighted average cost of capital (WACC) is therefore likely to remain at the high end of the historical range 5-10%, making it difficult for weaker competitors to finance growth. We believe that only the very strongest, AKA Bulldogs with above average returns on equity (ROE), have the ability to finance growth internally via cash flow or tap capital markets.

With the rising share of the digital economy now driven by the adoption of generative AI, a wide segment of the labor force may be permanently displaced. Strong competitors across all sectors are competing for a workforce which is not only conversant in concepts like agentic A.I. but are using these A.I. tools to drive efficiency and productivity. Implementation of these technologies across the greater economy is already unleashing a productivity boom not seen since the widespread adoption of the internet in the 1990s. It is also accelerating lead times to bring breakthroughs in science to market in areas of healthcare and energy transition, where we are finding interesting new investment ideas. We are seeing new Bulldogs emerge in biotech, where large pharmaceutical companies are monetizing research & development capex much sooner.

The global trend to reshore vital production and manufacturing capacity has largely been accelerated by the adoption of technology. Industrial companies are turning to technologies like digital twins to test the efficiency of production lines, warehouses, and even data centers to drive down costs. Producers that are efficient users of new power solutions are likely to be first to market and sustain stable profit margins.  In summary, the companies we define as Bulldogs tend to thrive in this highly competitive landscape.

CRN: 2025-11007-12995 R

The opinions and views of this commentary are those of C.J. Lawrence a division of Apollon Wealth Management, LLC (“CJL”) and are not necessarily that of Advisors Asset Management (“AAM”).