The Return of the Old Economy

In a world obsessed with AI and digital disruption, the market is sending an unexpected signal: physical assets — mines, pipelines, grids — are reasserting their value. Ignore this rotation at your own risk.

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The stock market is a forward-looking mechanism.

Depending on the visibility of the underlying business, it tends to discount conditions six to eighteen months ahead. Prices start moving long before the fundamentals are obvious. Only in hindsight does everything appear crystal clear.

That is why, alongside fundamentals, I always keep the stock price close at hand. It is the only truly objective signal we receive – an aggregate of thousands of opinions, expectations, fears, and forecasts, distilled into a single number. Imperfect, yes. But honest.

Stanley Druckenmiller once put it succinctly: «It doesn’t matter what a company is earning, or what it has earned – you must visualize the situation 18 months from now. That’s where the price will be.» The market discounts the future, not the present.

Recently, we have seen decisive moves in areas many had long ignored: materials companies such as copper and gold producers, energy stocks pushing to new all-time highs, or trucking businesses breaking out after years of consolidation.

What do they share? They are asset-heavy businesses – the kind that were out of favor for more than a decade. Since the bottom of the Global Financial Crisis, the market rewarded asset-light software models, scalable platforms, and capital-light growth stories. Hard assets, by contrast, felt slow, cyclical, almost outdated.

Yet in a world increasingly shaped by AI and digital disruption, something ironic is happening. The very assets investors dismissed as relics – mines, grids, pipelines – are precisely the ones that cannot scale with a keystroke. They require permits, capital, and years to build. That constraint, long seen as a weakness, is becoming a source of pricing power.

Put differently, scarcity regains value when the cycle turns. In a framing once popular with investors, it looks like the return of the «Old Economy.»

years it took.

Our favorite sector is making a comeback: healthcare.

It is one of the four good industries to own - alongside technology, industrials, and consumer staples. These are the sectors where you find businesses you can hold for decades, not quarters. Businesses shaped by structural growth, delivering high and stable long-term revenue and earnings growth, earning strong returns on invested capital, and exercising genuine pricing power.

Just as important, many of these companies operate behind formidable economic moats. Oligopolies. Duopolies. Occasionally even monopolies. This is the kind of hunting ground we like to roam.

Health care, in particular, enjoyed a rosy moment prior to the boom – and bust – of Covid. But strip that episode away, and the last five years have largely fallen short of expectations. There was little to celebrate, save for one standout story: the breakthrough weight loss drugs from Eli Lilly and Novo Nordisk.

Today, that is changing. The outlook is improving – both fundamentally and technically.

Healthcare is striking back.

Let’s dig in.

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Chart 1: Energy sector over 20 years hitting new all-time highs, price graph