On Valentine’s Day, investors highlight some of their favored stock or thematic opportunities within their portfolios.
Hari Balkrishna, portfolio manager of the T. Rowe Price Global Impact Equity strategy
"We are invested in a number of banks we believe can expand financial inclusion. In Brazil, we are invested in digital bank Nubank, which only had about two million customers a few years ago, but now has almost 70 million customers who have effectively been brought into the financial system in Brazil.
This can have a huge impact on individuals and society, whether through securing finance to buy a motorbike which assists mobility, investing in a business idea which creates employment, or buying a home to live in. We strongly believe this company has the potential to transform people’s lives by driving financial inclusion."
XPS Pensions Group
Ken Wotton, manager of Strategic Equity Capital plc
"One good example of an investment that meets all our portfolio stress-tests is specialist pensions consultancy and administration provider XPS Pensions Group. The company operates in a large and structurally attractive market, providing specialist advice to defined benefit occupational pension schemes. Demand is robust and growing because of regulatory drivers and the increased complexity of running these schemes.
In addition, XPS enjoys an attractive market position and competitive advantage. As a leading independent consultant, it is one of the leading mid-tier providers of advice and consultancy in the UK pensions market, but it is also a pure-play provider. By contrast, a number of its rivals are businesses owned by larger multinational groups with disparate operations. The final piece in the jigsaw is its attractive valuation. On a high single-digit enterprise value to EBITDA multiple, it trades at a discount to its peers – as well as to the multiples seen in M&A activity in the sector."
Alison Savas, investment director at Antipodes Partners
"We believe Australian gold mining giant Newcrest Mining offers investors an attractive opportunity. Newcrest has taken positive steps to maximize its portfolio by investing in projects like Lihir in Papua New Guinea, which is on track to become a one million ounce per year mine, with world class grades and lower costs. It also has longer-dated projects, including Red Chris and the potential expansion at Brucejack.
In total, this should see the company’s production grow 30 per cent over the next five years in volume terms. Given generationally low valuations, gold equities offer a very wide margin of safety and, in the case of Newcrest, multiple ways of winning in a highly non-correlated exposure."
IG Design Group
James Gerlis, co-manager of the TM Tellworth UK Smaller Companies Fund
"Since the heady days of mid-2021, when AIM valuations reached 10-year highs, the ride for AIM investors has been a painful one, with most sectors, excluding energy, seeing significant declines. However, with market valuations now back at levels not seen since 2016 and some key macro headwinds easing, we are increasingly optimistic about the prospects for AIM.
One example of a value-orientated AIM opportunity is IG Design Group, where we are backing a new management team to deliver a turnaround of the formerly highly valued gifts and craft products business. Recent updates from the company have already demonstrated signs of improvement. With the shares still trading on a mid-single-digit price-to-earnings ratio on recovered earnings, there remains a lot of upside if the recovery trajectory continues as we expect."
Anu Narula, head of equities at Mirabaud Asset Management
"According to Bank of America research, Gen Z is set to become the most disruptive generation to economies, markets and social systems. While Millennials are the top spenders today, Gen Z’s economic power is the fastest growing of all the demographic cohorts. The group’s income is set to grow 5x by 2030 to $33 trillion, or 27 per cent of global income. As such, we see significant potential investment value in Gen Z.
Dollar General is one retailer set to take advantage of the investment opportunity posed by Gen Z. In the company’s Q1 2021 earnings call, CEO Todd Vasos stated that the retailer is "aggressively expanding its product offerings" and "investing in technology and digital capabilities" to appeal to younger demographics. Favored by 77.4 per cent of Gen Z respondents in a Morning Consult poll, the retailer has expanded its food offering to attract younger customers interested in cooking at home over eating out."
Mark Baribeau, portfolio manager of the PGIM Jennison Global Equity Opportunities Fund
"Markets will likely remain highly uncertain for the remainder of the year, but we maintain a long-term perspective. Growth companies offering differentiated products and services that create real value for society will continue to prosper.
After decades of development and promise, electric vehicles have captured the public imagination, forced strategic pivots from global auto companies, and laid the foundation for a full self-driving future. We believe the leading electric vehicle players will redefine the relationship between carmakers and consumers, transforming the auto industry. The opportunity is also not limited to vehicles – the disruption includes batteries, the battery supply chain, and alternative sources of electricity generation."
Charles-Henry Monchau, CIO of Bank Syz
"We turned positive on Chinese equities following the 20th National Congress of the Chinse Communist Party in late October. At the time, we believed the market had interpreted the implications of this historic congress far too pessimistically. Since then, other positive developments have fueled our positive investment outlook on Chinese stocks. While most developed economies are on the verge of recession, GDP growth in China could reach 6 per cent in 2023. As the country emerges from its period of confinement, domestic demand should rebound strongly. The same phenomenon was already observed in the US and Europe in 2021.
We also believe that record savings should translate into a consumption boom. Chinese households have accumulated a considerable savings surplus in 2022, partly due to zero-Covid policies and a sluggish property market. With the end of the restrictions, this unprecedented savings surplus should stimulate spending on discretionary goods and services and trigger a virtuous circle by improving employment and income growth."