Value opportunities in low growth environment
There are plenty of attractively valued shares in the Australian market right now in spite of the fact that we are headed for a lower growth environment coming out of the global financial crisis, according to Fidelity’s head of Australian equities, Paul Taylor.
Elevated debt levels in Europe and the US could lead to higher taxation and lower spending, which could lead to a lower growth world and impact on Australia as a small open economy. Despite this, a double dip recession is unlikely because big companies have already cut costs and balance sheets are strong, meaning they are unlikely to further cut jobs, Taylor said.
Once the market becomes comfortable that there won’t be a double dip recession the recovery phase will resume, and there is still plenty of upside left in that recovery, he said.
The Australian market is attractively valued, although investors still needed to be stock selective, and a tight range of valuation multiples across the board means that shares with both higher and lower growth and quality are trading at similar valuation multiples. This creates opportunities for selective stock pickers, Taylor said.
“Today it’s all going to be about the top line growth,” he said.
“To get that top line growth we are really looking for companies that can increase their market penetration through a new product, through a new service. It could also be store roll out programs.”
Structural growth could also come from new technologies such as the iPad and 3D television, which have been popular recently despite a subdued retail environment, he said.
Fidelity’s portfolio is currently positioned for sectors and companies that offer the best structural growth opportunities, which at the industry level means sectors like healthcare, industrials and consumer goods, while at the individual stock level companies like Rio Tinto, Wesfarmers, Commonwealth Bank, SEEK and Oil Search offer the best structural growth, he said.
Recommended for you
The possibility of a private credit ETF is looking unlikely for now with US vehicles seeing limited uptake, according to commentators, but fixed income alternatives exist that can provide investors with a similar return.
Ahead of the approaching end of the financial year, State Street has shared five tips for advisers who are using ETFs in their client portfolios.
The use of active ETFs in model portfolios by financial advisers is a key factor in the growth of the products for iShares, according to BlackRock.
Global asset manager BlackRock has identified bringing private markets to the wealth channel as a key business area for the firm that could generate US$500 million in revenue in the future.
