Global Investment Thematics and the hidden gems they uncover | Australian Investors Association | 8 August 2017 | Fullarton Park Community Centre, 411 Fullarton Rd Fullarton SA

Are equity investors too sanguine and is 2017 a year of reckoning, when the increased political uncertainty and the end of easy money, is reflected in lower PE ratios as equity investors reduce exposure in favour of ‘safer’ assets?

The answer is “Yes but only for some companies”. It does not mean that equity exposure should be reduced. However, it is likely that returns within equity markets will become more diverse and after many difficult years for stock selection, 2017 may be a year when there is merit in focusing upon cyclical rather than safe companies. Large companies have strong balance sheets and are under pressure to use their cash for reinvestment rather than buying back shares.

Cyclical companies have learned to live with a difficult revenue environment by cutting costs and have very strong operating leverage. They are cheap compared to “safe” stable shares. M&A is also likely to increase which will put a floor on valuations in certain industries.
Using a number of valuation models and with over 30 years experience in global capital markets, Robert Swift will suggest ways in which investors can reposition their equity exposure and provide themselves with another year of positive returns.

Robert Swift,
Portfolio Manager, TAMIM & API Capital