Robinson Crusoe and the benefits of a sustainable business modelMarch 23, 2020By Christopher M. Dyer, CFADirector of Global Equity, Portfolio Manager, Eaton Vance Advisers International Ltd. and Ian KirwanGlobal Equity Analyst, Eaton Vance Advisers International Ltd.London - As in cities and towns across the globe, the Covid-19 crisis has brought uncertainty and disruption to the lives of London residents. We even saw the successful and respected former CEO of Vodafone scrambling to buy toilet paper in the local supermarket last Sunday. The UK government has either chosen a different path, or simply lagged, in its actions to confront the virus relative to other countries in the world. "Herd immunity" seemed to be the government's approach last week - until it was not. There was a public pledge, since reversed, to keep schools open. Restaurants and pubs initially remained open, but people were urged to stay away -- then Friday evening they were ordered closed. There is no ban on large public gatherings. The media widely reported Thursday morning that London would be "locked down" in the coming days, but the prime minister's spokesman denied these reports later in the day. Who knows what tomorrow will bring? As portfolio managers on the Global Equity Team of the Calvert International Equity Fund, we do not try to manage portfolios with tomorrow in mind. Our objective is to build and sustain wealth for our investors over the long term. We believe the real value in a stock lies in its ability to compound earnings over time. For this reason, we focus on the long-term ownership of companies with sustainable businesses. A strategy that seeks to balance upside potential with downside risk mitigation has the potential to create sustainable wealth for our investors. What would Robinson Crusoe own? We regularly ask our investment team, "If you were stranded on a desert island for the next 10 years and your entire wealth was held in a handful of stocks that you could not trade for the duration of your stay, which companies would you want to hold?" You would want to own companies that you were confident would compound in value and, regardless of what transpired over the next 10 years, are expected to be worth significantly more than they are now. Each company would have a secular tail wind of growth, high returns on capital, significant barriers to entry, a strong balance sheet and an outstanding management team that you could trust as stewards of your capital. In short, companies with sustainable business models that cannot easily be derailed by unpredictable, exogenous factors such as commodity prices, interest rates, elections, recessions or, yes, viruses. Structural growth outside the United States There are numerous long-term secular growth themes that are better accessed through international companies rather than US companies. These include luxury goods, growth in emerging-market wealth, next-generation communications and the electric vehicle transition. Add to this international companies that are global leaders in attractive niches and you have the makings of a portfolio whose performance is determined by a group of exceptional companies rather than a broad based portfolio whose performance is mainly dependent on geographic performance. Bottom line: As investors look ahead beyond the COVID-19 crisis and the opportunities now present in the equity market, it is important not to focus on which stock, sector or equity portfolio might snap back most quickly, but rather which portfolio may be positioned to deliver structural outperformance over the long term.