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Reduce exposure to infrastructure: Alphinity

Speaking to InvestorDaily, Alphinity lead portfolio manager Johan Carlberg said the traditional yield stocks and real estate investment trusts are now looking “fully-valued” following their strong run.

“While we don’t think rates are likely to go up in a hurry, you’re better off if you can find stocks that have good yield support but also underlying earnings growth to maintain or support the growth in that dividend, rather than the more traditional, stable yield stocks,” said Mr Carlberg.

Few stocks are performing strongly in the Australian market due to low volatility and valuation dispersion, according to Mr Carlberg.

“There’s not that much going on and we’re seeing a lot of companies trading at similar multiples,” he said.

One area in which Alphinity is currently seeing strength is in the building materials stocks.

“We’ve seen strong [building] approvals with the usual lags and those lags have actually been extended in this upturn,” he explained.

“We’re now seeing strong housing starts really pick up and that really puts a tailwind behind that sector.”

Mr Carlberg said investors in the building materials sector need to be aware of stocks that are operationally performing well and that are exposed to the right sectors.

“We’ve been highlighting stocks like CSR that’s got the right exposure and has that fixed cost leverage which we think the market’s potentially still under-appreciating and volumes and also prices are moving in the right direction,” he said.

 

Reduce exposure to infrastructure: Alphinity
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