Speaking to InvestorDaily, Franklin Templeton Investments portfolio manager Peter Wilmshurst said within Europe there are opportunities for profits to recover and multiples to expand.
“The key message is that we’re six years into a bull market, so you’ve got to work out where you’re going to get your opportunities going forward and ultimately that’s going to mean somewhere where you can still get profit growth or somewhere where multiples have room to expand,” he said.
According to Mr Wilmshurst, European earnings have considerable catch-up potential.
“At the broad level, there are reasons to be more optimistic that things are getting better,” he said.
Mr Wilmshurst said the region has implemented necessary reform, such as establishing a lead banking regulator last year, resulting in an increase in credit lending.
As a result, there has been a pick-up in consumer confidence and business investment.
Moreover, Mr Wilmshurst indicated that healthcare and financials are providing value.
The investment house is currently overweight both financials and healthcare, accounting for 47 per cent of the firm’s global equities portfolio.
“Healthcare is more about ongoing growth. The sector has re-rated from [considerably] cheap to what looks like more reasonable multiples.
“You’ve still got [a] long-term driver – ageing population – and an emerging middle class demanding more healthcare,” he said.
Mr Wilmshurst concluded that value and opportunities are found in regions and sectors that are currently unpopular.
“You want to be asking where the outlook is miserable, than say, where is there a big disconnect between the market price you’re being asked to pay and what the long-term fundamentals [are].”
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