Is there still value in global equities?

While the appetite for global exposure among South African retail investors is undoubtedly on the upswing – fuelled by a combination of rand weakness and a greater need for diversification – many are concerned that several global asset classes currently appear overvalued. The question then begs, where are the pockets of value in the global market for local investors seeking to maximise their rand returns?

Kyle Wales, one of the Boutique Heads of Old Mutual Titan – Old Mutual Investment Group’s new active fundamental global equity boutique – which has 1.3 billion Rand under management, says that even though the market may appear expensive at the moment, opportunities continue to exist within the global equities landscape.

“In terms of geographical pockets of value, we believe that emerging markets are looking cheaper than developed markets and Europe is looking cheaper than the US.”

“However”, he adds, “Just because a market, as a whole, may look overpriced, doesn’t mean there isn’t value to be found in certain, well-chosen stocks. It just means you have to look harder to locate them. This is where taking a bottom-up, valuation-driven approach can prove particularly useful as it focusses at a company-specific level, rather than working down based on a macro-overview.

“Among some of our top stock picks are consumer staples such as Heineken, Mondelez (which owns Cadbury, among other assets) and British American Tobacco. Because these stocks are defensive in nature, they are less sensitive to market sell-offs. This reflects our view that markets are looking quite expensive at the moment.”

Also among Old Mutual Titan’s top picks are four internet stocks – namely Amazon, Google, Facebook and Naspers (to get exposure to the Chinese stock, Tencent). “These provide us with exposure to multi-year secular growth opportunities and two emerging market stocks; these being BB Seguridade (Brazil), Axis Bank (India) which are beneficiaries of improving macroeconomics as well as rising incomes in those countries.”

An important point to remember, he adds, is that where a company is listed – especially in the case of large global holdings – does not necessarily determine the markets to which it has exposure. “Many of these businesses will have operations all over the world. For example, 40% of Mondelez’s (Cadbury’s) operational earnings are derived from emerging markets, even though the stock is listed in the US.”

Wales points out that taking on a bottom-up approach doesn’t mean that stock-specific calls that are made in the Old Mutual global equity UCITS fund aren’t informed by the macroeconomic fundamentals.

Wales concludes that when investing offshore, especially for a South African retail investor, it’s not simply a matter of choosing a market overseas where the relative valuation appears to be more attractive. “It is important to remember that not all valuations are created equal, as there is a risk-adjusted overlay that needs to be applied. A business in Russia, for example, should not command the same valuation as the same business located in the United States.

“While the market exhibits a lot of short-term volatility, economic fundamentals determine how a stock performs as an investment in the long run. This is why we believe investment managers should have informed opinions about the stocks within their portfolio in order to generate good returns for their clients.”



Latest


16 Feb 2021
Transition management services partnership announced

Standard Bank has signed a memorandum of understanding (MoU) with Chicago-headquartered financial services company Northern Trust, to partner on the…

Transition management services partnership announced

Standard Bank has signed a memorandum of understanding (MoU) with Chicago-headquartered financial services company Northern Trust, to partner on the delivery of transition management services across Southern Africa. Under the partnership, Standard Bank’s clients will gain access to Northern Trust’s full suite of transition management services. Transition Management is a…

16 Feb 2021
Tax free wealth creation with property funds

By Liliane Barnard, CEO and Portfolio Manager at Metope Investment Managers, and Aimee Glisson, Director: Operations, Performance & Risk at…

Tax free wealth creation with property funds

By Liliane Barnard, CEO and Portfolio Manager at Metope Investment Managers, and Aimee Glisson, Director: Operations, Performance & Risk at Metope Investment Managers The tax year, along with the deadline for an investor’s maximum R36 000 annual tax-free savings account contribution, comes to an end on the 28 February 2021. Investors…

16 Feb 2021
Why multi-manager investing is popular

Multi-management has been around for over two decades. This investment management approach is popular among many investors because it promises…

Why multi-manager investing is popular

Multi-management has been around for over two decades. This investment management approach is popular among many investors because it promises to deliver smoother, more consistent investment returns, despite cyclical turbulence of financial markets. Given last year’s drastic swings in financial markets and continued uncertainty on how the Covid pandemic will…

16 Feb 2021
Momentum Health Solutions unpacks COVID-19 vaccine roll-out plan

Momentum Health Solutions announced its COVID-19 vaccine roll-out strategy and how it intends to support both its members, as well…

Momentum Health Solutions unpacks COVID-19 vaccine roll-out plan

Momentum Health Solutions announced its COVID-19 vaccine roll-out strategy and how it intends to support both its members, as well as the uncovered population, in being vaccinated. As the COVID-19 virus continues to spread, a third wave is imminent, should the vaccination rollout not commence soon. Speaking at a recent…


Top stories


10 Sep 2020
How too much choice is draining your brain

By: Paul Nixon, head of technical marketing and behavioural finance at Momentum Investments From the words of Francis Scott Key…

How too much choice is draining your brain

By: Paul Nixon, head of technical marketing and behavioural finance at Momentum Investments From the words of Francis Scott Key that dubbed America “The land of the free”, which stuck, to the unforgettable Mel Gibson monologue where an army of painted Scots were willing to trade their lives for the…

13 Apr 2020
Investors should keep a reasonable investment allocation outside of SA

MoneyMarketing asked Roland Gräbe, the head of Tailored Fund Portfolios at Old Mutual Wealth, about offshore investments in the COVID-19…

Investors should keep a reasonable investment allocation outside of SA

MoneyMarketing asked Roland Gräbe, the head of Tailored Fund Portfolios at Old Mutual Wealth, about offshore investments in the COVID-19 environment and what form a global market recovery will take.

13 Apr 2020
SA’s Proposed Covid-19 Disaster Management Tax Relief

The National Treasury recently issued the draft Disaster Management Tax Relief Bill (Bill) for public comment by 15 April. The…

SA’s Proposed Covid-19 Disaster Management Tax Relief

The National Treasury recently issued the draft Disaster Management Tax Relief Bill (Bill) for public comment by 15 April. The draft Bill, together with its explanatory memorandum, provides clarity with regards the tax relief measures President Cyril Ramaphosa announced on 23 March.

10 Apr 2020
When the going gets tough, farmers are on familiar territory

South African farmers are old hands at adapting to uncertain and daunting circumstances, and our local agricultural industry has proved…

When the going gets tough, farmers are on familiar territory

South African farmers are old hands at adapting to uncertain and daunting circumstances, and our local agricultural industry has proved to be most enterprising in acclimatising to challenges as they arise.


Visit the official COVID-19 government website to stay informed: sacoronavirus.co.za