The equities bull market is intact, but investors should focus on buying growth stocks as they are most likely to outperform, according to Fidelity Investment Managers president of investments Anthony Bolton.
“I think we are in a multi-year bull market. The first phase of that finished earlier this year and we then had a decent consolidation like many bull markets have,” he said.
“I think we’re now in the second phase, and as of here I think its going to be different.”
He said the first phase of the bull market, which went from March 2009 to April 2010, was a “mirror image” of what occurred during the financial crisis.
“What went down the most in the bear market recovered the most in the first phase of this bull market,” he said.
“It was about cyclical companies, low-quality companies.”
“In this next stage and in a low-growth world I believe what investors are going to be turned on by and pay for are companies that can grow in a low-growth environment or regions or countries, so I expect them to pay up for growth and I expect that growth to get quite overvalued.”
Bolton, who runs the Fidelity China Special Situations Fund, said he was investing in companies with the ability to grow significantly over the next 10 years. He said even though their valuations are generally higher than Western counterparts, they were often not at a significant premium.
He also liked small to medium-sized companies with reasonable growth potential.
Specific sectors he favoured include retailers, automobiles, telecommunications, media, banks, insurers and brokers.
“People say that these sectors are already quite highly valued. I think they are reasonably valued and some of them are highly valued,” Bolton said.
“I think if my view of the world and my view of China are right, these stocks are going to become very overvalued at some stage over the next few years.”
