Echoes: Durable growth still exists for the patient and diligent

With a career in equities investing that extends beyond three decades, Loomis Sayles’ Aziz Hamzaogullari knows more than most about market bubbles and corrections, and why uncertainty demands a structural and permanent approach to risk mitigation.

As we look at 2026, things feel especially uncertain in markets. How does the market environment compare to other bouts of turbulence you have invested through?

Aziz Hamzaogullari (AH): There is something called hindsight bias. Most of us tend to believe that the world is more certain than it is on any given day. And after the fact, we explain things as if we knew what was going to happen next.

Since 2000, there have been five market corrections of 15% or more. And, if you extend out even further than that – all the way back to 1871 – over the past 150 years or so there have been 23 corrections of 15% or more. So, roughly every six and a half years there has been a major market event^1.

If you go back and look at the newspapers the day before the event, you are going to see that, in most cases people were blindsided. We tend to forget that most of the time we won’t see the risk before it happens. In our industry, many investors tend to think in terms of risk on or risk off, based on their understanding of the observable risk.

As investors, we have to train ourselves to remember that risk is always present, it’s just that some days we think it is not. We need to embrace that uncertainty. You don’t make money by explaining the history of what happened. It’s a good story, but it doesn’t generate alpha. We believe you have to understand that there is a risk around the corner that no one is talking about that matters – and by the time people are talking about it, it is usually too late. Therefore, we believe one has to allocate capital with a structural and permanent approach to risk mitigation.

Nobody can predict the future, but as a growth investor, it must feel sometimes that predicting the future is exactly what it looks like you have to do, because the companies you invest in are often playing in unproven spaces. What kinds of things are you looking for when you evaluate a company?

AH: First and foremost, we seek to understand the company on three metrics: quality, growth, and valuation. It has to be truly unique on all three fronts for us to even consider it as an investment. One of the quality aspects we evaluate is management.

I think it was Thomas Edison who said, ‘A vision without action is a hallucination’. Many of the companies in which we invest are still run by their founders. In our experience, founders not only have a vision, but also a very clear understanding of how they can turn that vision into a commercially viable product or service and they do this in a way that is unique.

Take Amazon for example. Jeff Bezos clearly laid out in his annual report back in 2006 how he would choose to invest. First, he said, whatever business I go into, I want to offer something truly differentiated and something that will be very difficult to replicate. That’s competitive advantage.

Second, he said, whatever I’m going after, I want it to be really big so that it can not only provide growth opportunities, but also be worth my while to invest in that business. Third, he said, I want these businesses to generate really strong cash flows and good return on capital.

On the surface, these are very simple principles, but without discipline and vision, they are very difficult to implement successfully. Jeff Bezos started with e-commerce and then added Amazon Web Services, then logistics, and then advertising. But it started with this very strong core business that was very difficult to replicate. With the cash that the business was generating, he had the vision and understanding of where he wanted to take the core business. But he also built upon it.

It hasn’t all been smooth sailing, of course. In the case of Amazon, there have been roughly 14 instances over the past two decades where there was a 20% or more correction². The reasons for those corrections are multifaceted. Some were related to market-wide issues, like in 2008 or 2022, while others were company-specific, when the company delivered results that didn't meet short-term expectations for the underlying business, but which turned out to be great, long-term decisions.

For example, when the company was building Amazon Web Services [AWS], it required significant capital investment, and many people didn't understand the profit potential and cash flow generation potential for this business. They questioned the validity of the decision-making by the management. But it turns out that today, AWS provides more than half of the company's profits.

Do you always look to the founder to dictate the long-term growth potential of the business?

AH: Jeff Bezos is an example of a founder who, over many decades, continuously made his core business stronger while adding all these adjacent businesses that are as strong and as attractive in terms of differentiation and growth. But, importantly, to be successful, they don’t go after every opportunity; they only go after those opportunities that fit those principles.

If you compare that to Dell, which was a great business 20 years ago. They sold direct to consumer and direct to enterprise, and we believed they had a significant competitive advantage in that business.

However, when the management team made the decision to also go indirect and start competing with vendors like Compaq and HP, we said, well, this structurally changes how we view the business. Why would they start going into an indirect way of selling servers and PCs where they don't have the same competitive advantages as their competitors do?

We saw that decision as a response to the company realising that their core growth engine in direct-to-consumer and direct-to-enterprise was more limited. Dell wanted to expand their growth by moving into indirect sales. We viewed this as a significant structural change to their business model, which not only altered our view of the direct-to-consumer business opportunity but we also understood that the company wouldn't have the same advantages in the indirect business. As a result, we decided to sell our stake in Dell in 2008.

How worried are you about the current levels of concentration in the markets?

AH: There's no question that we have significant concentration in the market today with the Magnificent Seven. But this is not the first time that markets have experienced high levels of concentration – nor the first time the media has coined a catchy phrase to try and understand what is going on.

Whether it is the Mag 7 or FAANG or MAMAA, or the Four Horsemen or the Nifty 50, it's important to note that what drives success is ensuring you don’t get blinded by the acronym and think that all the companies encompassed by it are the same. You still have to treat each one on its own merits, understand the differences among these groupings. We will choose to invest only in those companies that meet our quality, growth and valuation criteria.

It is also why we have been talking a lot in recent months about the difference between active and passive concentration. Investors with passive exposure to cap-weighted equity indices like the S&P 500 unintentionally become more concentrated as short-term investors chase upward momentum and their portfolios become more concentrated in fewer stocks. And, if you are not paying attention, you may think you are diversified, when in actual fact you are not.

I would contrast this with active concentration, which is where investors selectively choose not only the stocks they own, but also the size of each stock position – and thereby concentration – based on long-term valuation. This is what we do in our strategies.

To get a true understanding of concentration and diversification, we think you need to look at the underlying business drivers of each company. This is what we do for our portfolios, we look at what drives the success of each business and then ensure that our portfolios are diversified across multiple business drivers. We make sure that we never have more than about 20% exposure to any one business driver.

Consider the early 2000s when China experienced rapid growth in infrastructure development. Across the energy, industrials, and commodities sectors, companies associated with that growth in China saw unusually high returns. If the individual companies in a portfolio were aligned to this China growth driver, even a portfolio with broad sector diversification could realise a synchronisation of business drivers when the unusually high growth inevitably but unpredictably normalised.

Similarly, during the 2020-2021 work-from-home bubble, the returns of companies in many different sectors including information technology, healthcare, communications services, and financials were outsized beneficiaries of the pandemic lockdown. Even a portfolio that appeared well diversified across these sectors was riskier than met the eye when this bubble inevitably burst if the underlying companies were highly correlated to the temporary work-from-home growth driver.

So, the trillion dollar question is: are we in an AI bubble or not?

AH: We believe that AI is the biggest disruption since internet-based computing decades ago. Similar to that change and structural disruption, we believe the biggest benefit of AI will be the productivity boost that we should be observing across all industries and all companies.

It's important to note, however, that just like the disruption in internet-based computing, while there will be many beneficiaries of that productivity boost, the direct winners, those companies that sell directly into the value chain will be very few because the barriers to entry are so high – they will require a platform and a tremendous amount of research and development and Capex dollars. To put this into perspective, today, if you look at the top 1,000 companies in the US and their R&D spend, four out of every $10 is being spent by the Magnificent 7.

That is not to say that there won’t be stock price declines, of course, and there will be cyclicality when it comes to when and for how long certain companies sit at the top of the leaderboard. The key is recognising if those declines are temporary or structural. What we try to do is find those few great businesses, continually remind ourselves that they are exceptionally rare and then let compounding do its work.

Interviewed in November 2025

¹ Source: Journal of Portfolio Management, July 2023, ‘Fairy Tails: Lessons from 150 Years of Drawdowns’, Ashwin Alankar, Daniel Ding, Allan Maymin, Philip Maymin, and Myron Scholes. Number of drawdowns since 2000 as at November 2025.

² Source:  Loomis Sayles, FactSet, Bloomberg.  As of 31 December 2024. Examples are provided to illustrate the investment process for the strategy used by Loomis Sayles and should not be considered recommendations for action by investors.  They may not be representative of the portfolio’s current or future investments and they have not been selected based on performance.  Loomis Sayles makes no representation that they have had a positive or negative return during the holding period. Past Performance is no guarantee of future results.