Building Conviction in a World of Shifting Narratives

By: Chandan Khanna, William Blair Investment Management

Portfolio Manager Chandan Khanna explains why William Blair believes global markets present a landscape of opportunity for equity investors despite macroeconomic headwinds.

Global markets present a landscape of opportunity for equity investors despite macroeconomic headwinds. Chandan Khanna, a portfolio manager on William Blair’s Global Leaders and International Leaders strategies, explains how he seeks to take advantage of such opportunities.

Investment Philosophy

Khanna says his investment philosophy is a blend of quality and growth. “Growth on its own isn’t enough, because that’s where you can run into real downside risk,” he says. “And quality without growth can lead you to overpay for stability that isn’t actually compounding. So, the philosophy is really about finding that balance — businesses that have the quality characteristics you want and the growth to justify the valuation.”

Investment Approach

“At its core, equity is a unique asset class. The downside is limited to your invested capital, but the upside is theoretically unlimited. To capture that asymmetry, many investors focus so much on avoiding mistakes that they miss the big winners. But over time, the big winners can drive long-term returns as that growth offsets the inevitable losses elsewhere in your portfolio,” says Khanna.

Because of that, Khanna seeks to identify those outsized winners, while believing quality discipline helps avoid permanent capital impairment. “To do that, I’ve historically leveraged a “5/10/15” approach, which means I look for companies that have the potential to deliver 5% organic sales growth, 10% earnings per share (EPS) growth and net margin, and 15% return on equity (ROE), margin of safety, and earnings before interest and taxes (EBIT) margin. It’s a way for me to put guardrails around words such as quality and growth, which can mean different things to different people.”

Where Growth is Today

“Growth shifts over time. Identifying that shift and where it is moving to is part of the job — and part of the skill,” says Khanna.

For example, early in his career, consumer staples used to be a key area of global growth. But around 2012 and 2013, growth increasingly converged in technology. “We were early to move our portfolio allocation there. Within technology, growth leadership moved in fits and starts — from software to semiconductors. Today, the divergence between semis and software, even within tech, is as wide as it has ever been.”

Future Growth Opportunities

“A growing growth theme is the personalization of everything,” says Khanna. “As the cost of tailoring products and services to the individual continues to fall, the opportunity set expands.” He continues, “In healthcare especially, we’re moving toward more personalized approaches to treatment and prevention. People respond differently to the same inputs, and advances in data, diagnostics, and technology should allow for much more targeted care. That has meaningful implications for both outcomes and economics.”

Approaching Periods of Volatility

In volatile market periods, it’s important to deconstruct what the market is saying versus what’s actually happening. “A lot of the time the move is driven by the narrative rather than by fundamentals. With good, high-quality companies, earnings don’t usually change that quickly. They may miss a quarter, but they’re often still compounding at attractive rates. What shifts faster is sentiment and the market’s view of the long-term story.” Khanna continues, “We’ve seen that repeatedly. In 2022–2023, Meta was viewed as a legacy media business — almost a “Yahoo 2.0” narrative — and then it became an AI leader. Alphabet was seen as an AI laggard not long ago and then quickly rerated. The market’s perception can change much faster than underlying fundamentals. In those moments, the key is separating narrative from reality.”

Valuation in Portfolio Construction

Khanna believes valuation is very central to the “5/10/15” framework. “We look for roughly a 15% margin of safety to intrinsic value when we invest. That said, it’s the last thing we assess. The starting point is always the business model. Then we do the work on the financial model and valuation to determine if now is the time to buy that attractive business.” “There are plenty of businesses we admire but won’t own because the valuation isn’t right. In those cases, we’re willing to be patient, sometimes for years, and wait for the market to offer an opportunity. When it does, we look to move,” Khanna concludes.

This article is excerpted and edited for length. Click here to read the full article.

About the author: Chandan Khanna is a portfolio manager for the Global Leaders and International Leaders strategies at William Blair Investment Management. Before joining the firm in 2025, he was a senior partner and global equity strategy portfolio manager at Eighteen48 Partners, a boutique investment firm based in London. Previously, Chandan worked on the buy side at Capital Group. He has also held roles at Morgan Stanley and KPMG. Chandan is a Chartered Accountant. He received a B.Com from the University of Mumbai and an M.B.A. from INSEAD.