Speaking to InvestorDaily, Nikko Asset Management head of global equities Will Low said there had been a “reappraisal of more cyclical businesses” in markets recently as investors shift from building portfolios for capital protection.
“In the middle of last year the dispersion between the valuations that people were paying for what we call bond proxies, safe-yielding businesses, vs more cyclical ones was possibly the most stretched it’s been for any significant period,” he said.
“The net result is that we’ve had possibly the most episodic rotational bouts of belief in growth, and therefore reappraisal of value.”
Mr Low said stock picking was critical to generating returns, and that there would be many individual winners and losers within different sectors “rather than something specifically sectoral”.
“We would suggest buying quality businesses that can sustain and grow the cash flows and are also valued at a sensible price – That’s always been the bedrock of your return,” he said.
Additionally, Mr Low said investors should “obsess less” about deploying assets around the outcomes of political events such as elections, noting that they are “relatively difficult to predict”.
“You’re better off focusing on investments where their growth, cash flows, and potential returns are driven by what the individual businesses can do, rather than being wholly beholden to the ability of either politicians or cheap debt to engender growth,” he said.