Investors should not be afraid to overpay for tech-focused names that are likely to continue to dominate the global share market as the US election and COVID vaccine progress inject more volatility, a global fund manager has said.
GQG Partners Australia and New Zealand managing director Laird Abernethy said the fund manager’s view was that technology and digital businesses would continue to perform well heading into 2021, despite some market participants believing multiples for the stocks were now too high.
“The winners in terms of stocks we’ve selected are those in the tech and healthcare space which have strong balance sheets, and we have not been afraid to pay up for those,” Mr Abernethy said.
“E-commerce, both in emerging markets and globally have also been very strong. In China there’s two large firms we invest in there in Tencent and Alibaba, and we also like and have been rewards for investing in some of the more domestic names and state-owned enterprises over there.
“We are maybe paying a bit more than some people are prepared to pay for them, but that’s what's driven the outcomes.”
Mr Abernethy said the extreme volatility investors had ridden was not likely to smooth out heading towards the end of the year, with the US election still an unknown quantity and a COVID-19 vaccine still seemingly months away.
“I don’t think the market is going to get less volatile with the election coming up and the trade wars going on and COVID,” he said.
“We haven’t changed the portfolios much at all since earlier in the year and we don't see anything in the shorter term that will change them. I think we need to be conscious of a vaccine and if that comes to light, that might change with the data points and add more cyclicality back into the market and some more stocks will look appealing.”
Mr Abernethy said the US election result was not likely to cause as big an upset to the market as in 2016, but questions still remained around how President Trump would react to a potential loss.
“The markets have priced in a Biden or a Trump victory - under Biden there might be more increases in corporate tax rates but it’s nothing to change the portfolio over,” he said.
“If Sanders had become the nominee, that would have been quite interesting because some of those healthcare names might have pulled back, whereas Biden is much more moderate.
“That’s taken some of that immediate risk away, but what happens after the election may be interesting - if it’s contested, we haven’t been in that environment before.”