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Janus Henderson's Bennett: 'two bad years makes you a pariah'

Janus Henderson's Bennett: 'two bad years makes you a pariah'

The market has gone nuts with its short-term views, too much ink is being wasted discussing meaningless trade wars and everyone has a misguided belief that they are a Brexit expert.

European equity investor John Bennett has issued a traditionally forthright outlook for the year ahead, which sets out his stall for capitalising on a potential recession in global markets.

Bennett, who runs seven funds at Janus Henderson, said markets have become obsessed with narratives, such as trade wars and Brexit, while opportunities will appear in fractured markets.

‘There is a very good chance of a profits recession just about everywhere. So you don’t need GDP recession validation. But stock price moves in the second half of 2018 are telling you: margins / profits are going into recession across a wide expanse of the market. That, for me, spells opportunity.’

In terms of positioning, Bennett said he will be bargain-hunting as the recession takes hold. ‘If I look at some parts of Europe, and how it has behaved in stock market terms: industrials, manufacturing businesses, autos, auto components, you are going to get bargains.

‘You might already be getting those bargains now, but you are going to get them in 2019. European equities, as far as I am concerned, have already voted for recession,’ he said.

Bennett, who said a recession could still be avoided, offered a word of warning on risk. He reiterated his belief that investors need to look beyond headline-grabbing topics, such as trade wars, and focus more closely on growth stocks.

‘I will tell you where I think the single biggest risk is. I have been such a bore, because I have been wrong for the last couple of years and now it is starting to come right: growth/momentum stocks. True growth stocks are probably fine. But a lot of stocks were masquerading as growth stocks. Investor positioning is an enormous risk – for those investors,' he said.

‘The lead market globally, is US equities. If I am right that they still have very substantial downside risk, then I find it very hard to believe that other markets are going to have very substantial upside. I think the poor cousin – European equities – probably outperforms US equities in the year ahead – by going down a lot less.’

When asked about key calls for 2019, Bennett criticised the shortening of market expectations.

‘You know what it is like in this business: two bad years and it is confirmation of pariah status. The industry has gone nuts, as far as I am concerned, on short-termism,' he said.

The three year returns from his flagship European Selected Opportunities fund have fallen behond his peers as value has suffered, with the fund up 22.3% compared to the peer group's 27.5%. The last 12 months have been better though, with the fund down 5.5% versus the peer group's 7.1% fall.

‘We are seeing validation that valuation does actually matter. I love all this ‘valuation doesn’t matter’ … valuation doesn’t matter until it matters. This year was a reminder that it matters. It is only the beginning of that reminder, as far as I am concerned, for popular areas such as US equities and tech in particular.’

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John Bennett
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67/101 in Equity - Europe Excluding UK (Performance over 3 years) Average Total Return: 31.67%
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