The top five contrarian plays of the year so far
By Kristen McGachey, 16 Feb 17
From betting on Europe over the US to sticking by emerging market debt, we look at five ways portfolio managers have stepped outside the box early on in 2017.
Although the Sanlam FOUR Stable Global Equity Fund run by Colin McQueen has a low annual turnover rate of stocks, given the portfolio’s low-risk, CPI +6% inflation mandate, he said he cannot afford to sit on companies with rising valuations.
That’s why he has been dumping his European consumer staples for US healthcare stocks of late.
“For a while, Europe consumer staples were a nice thing for fund managers because they were valued lower than their US peers but were growing faster due to their EM exposure,” he stated.
Now, European consumer staples like Unilever, Coca Cola and Nestle have become too popular for McQueen’s liking so he is seeking out stocks in the relatively cheaper and “out of favour” US healthcare sector.
Instead of gargantuan drug makers, he is more interested in investing in distributors and medical device manufacturers.
“We bought a drug distributor called Amerisource Bergen based in the US this year. It is a fantastic company that has generated 30% return on equities and been growing in line with inflation. They are also in a very concentrated market with three other major players, and of those, they are the biggest and best one.”
And McQueen thinks President Trump’s lenient corporation tax rate will provide a further boon to the sector that will benefit domestic companies like Amerisource Bergen.
Tags: Bonds
