Among the various debates on how to capitalise on the equity markets under the current economic clim...
Among the various debates on how to capitalise on the equity markets under the current economic climate, Edward Bonham Carter, Joint Chief Executive of Jupiter Unit Trust Managers, has thrown his weight behind buying up blue chip stocks while they sit at undervalued prices.
Jupiter's philosophy focuses on stock picking rather than simply predicting markets or economies. Bonham Carter manages the Jupiter Undervalued Assets Fund which since its launch in May 2000 has returned +3.33%, compared to a FTSE All Share return of -31.44%.
The fund has tended to focus on small cap and medium-sized companies, but with share prices plummeting over the last 18 months, Bonham Carter emphasises the opportunities of buying blue chip shares like Shell or Glaxo.
"Shell or Glaxo have fallen considerably in price, and in my view, come down to valuation levels which more than discount any risk on the down side. It doesn't mean that share prices can't fall further, but over the next three to five years, selective equities are going to do well."
Although Bonham Carter believes opportunities are promising, he does not predict a general return to the excessive levels of the '80s, instead investors must learn to expect lower levels.
"We are now in a low inflation world; in the UK, if we take the assumption that we will average 2 - 3% growth for the next 3 to 5 years, then we think it would be reasonable for people to expect an average return out of UK investments and European shares of roughly 5 - 7% per annum," he says.
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