Sarasin House, the investment boutique, believes that 2002 will be the year of the focused investor,...
Sarasin House, the investment boutique, believes that 2002 will be the year of the focused investor, but will also provide a headache for investment strategists as few investors active today have seen similar market conditions.
Guy Monson, chief investment officer at the group, known among intermediaries for its range of thematic and offshore funds, said: 'Even the recession from which we are now emerging appears unique; it may have been one of the mildest in economic terms, but its effect on corporate profits was one of the most severe ever recorded.'
If the hypothesis of many economists is borne out, and it turns out that February marked the end of the US recession, then this downturn will have lasted just 11 months from start to finish, he added.
'Another characteristic that sets this recession apart from its predecessors has been the near simultaneous response of the other major economies to every move in the US, both in the bust and now in recovery. Such synchronised behaviour is a reflection both of the intricate ties of capital and trade flows that now link economies, but also of the causes that lay behind this slowdown.'
He said that it was not Alan Greenspan who deliberately slowed activity, but rather a combination of collapsing corporate technology spend coupled with a surge in international energy oil prices that hit all economies simultaneously.
This low inflation and economic recovery situation offers long term investors a good opportunity, he said, but risks to markets are posed by the oil price remaining too high for too long, the US military operations in the Middle East and further international terrorist activities.
Monson said Sarasin, as a result of these factors, is looking for equities which show a number of characteristics. He said Sarasin is seeking: earnings visibility through a clear business model, gearing to a cyclical recovery with a bias toward basic industries, a strong balance sheet, and high credit rating.
The group is also looking for valuations at or below market average, with low P/E at growth ratios, however, it is also biased away from companies unduly dependent on US or UK discretionary consumer spending.
The house has a continuing bias towards companies in the emerging markets and towards less well researched global mid cap stocks.
Monson said: 'In summary, we are convinced that 2002 will turn out to be a surprisingly good year for the focused equity investor. To succeed though will require some determined shifts in investment styles.
'This will mean a move from passive to active management, from a US centric policy to one focused internationally, as well as a clear shift from a sector driven strategy to a thematic model. This will form the basis of our policy and of our reaction to the very real opportunities offered to investors by today's truly unique economic conditions.'
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