Bell Asset Management is hopeful of strong returns from the healthcare and consumer staples sectors this year, acknowledging 2020 left behind a “lopsided economy”.
In its Global Emerging Companies fund, it was currently overweight to both healthcare and consumer staples at 17% and 9.5% respectively while consumer staple stock Kroger was the fund’s top weighting at 3.1%. As well as this, it had smaller weightings in its top 10 to three healthcare stocks; two US ones Amerisourcebergen and Cerner Corporation as well as Danish endoscopy company Ambu A/S.
In its latest factsheet, Bell said Ambu A/S had been the biggest contributor to returns during December, contributing 0.49% to returns. Shares in the firm had risen 110% over the past year.
Ned Bell, chief investment officer at Bell, said he was constructive on the outlook for global small and mid-cap equities as there had been a swift recovery since March 2020 and they should benefit from the earnings leverage coming out of economic downturns.
“With regards to our portfolio, we are constructive but are acutely aware that the culmination of events in 2020 has left behind a lopsided economy,” he said.
“Two of our overweight sectors are healthcare and consumer staples. We strongly believe this allocation will be a key contributor to returns given the fact that the relative valuations of both these sectors are near 10-year lows when compared to the broader benchmark.”
However, he also highlighted the recent speculative activity by retail day traders into GameStop and silver which was an example of how fundamentals were taking a back seat to speculative activity.
“Much of the risk taking and momentum-based trading is especially prominent in many unprofitable companies that are now trading at extreme valuations and pose a high risk of investor losses in the years to come,” he said.
“[There has been] a big increase in the prominence of retail investors, driven by factors including the ‘Robinhood’ phenomenon, stimulus checks, increased unemployment benefits, loan holidays and increased disposable income due to shutdowns and reduced spend on travel and leisure, as well as the spruiking of stocks taking place on various social media and online forums.
“A huge share price appreciation in many thematic stocks including companies with exposure to areas such as electric vehicles, hydrogen fuel cells, solar energy, Bitcoin/blockchain and short squeezes in many of the most shorted names.”
The Bell Global Emerging Companies fund returned 11.3% during 2020 versus returns of 11.8% by the Australian Core Strategies global small and mid-cap sector, according to FE Analytics.
