The fall in the Australian equity market has lowered price earnings (PE) ratios across the board but this does not mean investors should look to value managers for the best returns, a senior executive of a major research house said.
“Our position right now is actually style neutral and we’re also fairly cautious about style at the top level,” van Eyk head of investments Nigel Douglas said.
He warned that it was easy for fund managers to be caught out by value traps in the current market predicament.
“There are stocks that look cheap but it can turn out that the earnings figure is completely wrong and the yield is high for a good reason,” Douglas said.
He predicts it will be some time before value stocks can be picked with a degree of confidence.
“If you look at downward earnings revisions, and the trend in that, it’s only just started. It’s also been a bit mixed, it hasn’t been a uniform trend yet,” Douglas said.
“We think it’s a bit too early for value but value disciplines are going to come to the fore going forward,” he said.
However, he said the discipline exercised by value managers would pay off in the long term.
