Volatility in global equity markets continues but there are opportunities for those with a bottom-up approach, according to Fidelity associate director, global equities, Didier Lenouvel.
Speaking at the Sydney 2010 Fidelity Investment Forum yesterday, Lenouvel said looking outside of Australia “you could be forgiven for thinking that it’s all doom and gloom”.
“And yes I have to admit that some of the key developed economies are facing tough times ahead, and certainly when I compare it to the Australian economy you appear in much better shape,” he added.
Despite widespread concerns, however, he did not believe that the developed economies would face another recession.
“Based on what we are seeing and what analysts are saying, looking at company earnings, looking at fundamentals and talking to company management day after day, we can’t see any evidence of a sharp deceleration in earnings,” he said, adding that he was confident there would be growth, albeit subdued.
He said valuations were attractive but the key thing was to be selective, look at the fundamentals and only pick the best stocks.
Didier said Fidelity’s portfolio themes included: increasing consumption in the emerging markets, which he said were dynamic and had long-term potential; new products and innovation; the healthcare sector as lifestyle changes continue to impact on health; depleted natural resources and those companies that were exploring new fields or catering for increased consumption in emerging markets; changing regulation that may benefit certain companies, for example the beer industry in Russia where the Government is trying to kerb excessive drinking of hard alcohol; and merger and acquisition activity worldwide.
Fidelity head of Australian equities Paul Taylor (pictured) agreed that a double-dip recession in the US was unlikely as corporate balance sheets looked in good shape.
“It’s very unlikely that they will see another round of cost cutting,” he added.
He said the Australian market was attractively priced at the moment, and with companies showing similar valuation multiples he believed there was “fantastic opportunity for individual stock selection”. He added that with low growth going forward, considering top line growth was key.
“It’s an interesting and exciting time to invest,” he said.
Taylor said currently Fidelity’s portfolio is overweight consumer staples, industrials, healthcare, energy and consumer discretionary, while it remains underweight in financials, materials, telecoms, IT and utilities.
