Five ‘unloved’ investments worth a fresh look
By Jassmyn Goh, 18 Apr 18
Long term investors should seek out some often over-looked sectors to boost portfolio diversification, according to Morningstar Investment Management. Click through the slides below to find out which five areas it has identified as hidden investment opportunities.
Source: FE Analytics
While the telecommunication sector has significantly underperformed relative to the broader market, Kemp believes it has become attractive from a valuation perspective.
He said fundamentals for the sector were currently very weak with a stagnant real revenue which had compressed profit margins and return on equity at a 14 year low.
“It is on this basis that the telecommunication sector makes for fascinating analysis. On the one hand, it is a troubled sector that faces several shorter-term risks including very high payout ratios and elevated debt levels,” Kemp said.
“However, for longer-term investors that stand willing to look through shorter-term noise, there appears to be sufficient reward for risk on a relative basis.”
FE Analytics data on European telecommunications indices reflected this with the sector only returning in the positive when the investment horizon was five years and above.
For the five years to 31 March 2018, the indices returned between 44.44% to 26.31%, and between 68.63% and 48.10% for 10 years.
The performance jump between three and five years was substantial with thee year returns between -12.91% and -22.75%.
Tags: Investment Strategy | Russia | US
