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Opportunity knocks: 10 wealth managers' key calls

With volatility in the ascendency, our readers are turning to ETFs, Japan and China for returns - or perhaps we would all be better off buying a lottery ticket.

Mark Parello

Chartered wealth manager and branch principal, Raymond James, Manchester

‘Political uncertainty continues to cause a drag on equity markets, with our biggest concern being the challenge to global trading. With uncertainty comes opportunity, however, and we hold an overweight cash position, which we will drip into three areas.

‘Vanguard FTSE 100 ETF: The majority of money managers are underweight the UK. The FTSE 100 has risen less than other major global equity indices since the recovery from March 2009 and has fallen harder since February 2018. We are starting to take a contrary view believing this represents a buying opportunity.

‘Vanguard S&P 500 ETF. While many view president Trump as a loose cannon, we believe his pro-business policies will win the day for investors.

‘We are also taking direct positions in quality businesses, where we have met the management and understand the motivation and the numbers. SimplyBiz is one example of this, which is due to list shortly.’

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Mark Parello

Chartered wealth manager and branch principal, Raymond James, Manchester

‘Political uncertainty continues to cause a drag on equity markets, with our biggest concern being the challenge to global trading. With uncertainty comes opportunity, however, and we hold an overweight cash position, which we will drip into three areas.

‘Vanguard FTSE 100 ETF: The majority of money managers are underweight the UK. The FTSE 100 has risen less than other major global equity indices since the recovery from March 2009 and has fallen harder since February 2018. We are starting to take a contrary view believing this represents a buying opportunity.

‘Vanguard S&P 500 ETF. While many view president Trump as a loose cannon, we believe his pro-business policies will win the day for investors.

‘We are also taking direct positions in quality businesses, where we have met the management and understand the motivation and the numbers. SimplyBiz is one example of this, which is due to list shortly.’

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Matthew Hull

Chartered financial analyst and portfolio manager, Tamac, Salisbury

‘The return of volatility to more normal levels in Q1 has presented some interesting areas of opportunity in the markets. Despite asset market volatility, global growth is good and inflation is moderated. There continues to be a large amount of cash supporting the markets following a dip.  

‘We look to acquire companies which deliver long-term structural growth and especially like innovative global technology leaders. Massive increases to computing power have allowed the internet to grow and thrive through new and disruptive business models, this trend is set to continue as digital technology changes the way people and companies work and connect.   

‘Another focus continues to be in mainland-listed China, where we buy growth companies that are positioned to become leaders in their fields, within the Chinese market and globally. These industry champions offer extraordinary growth rates at attractive valuations. The second-biggest economy in the world continues to be under-represented in global portfolios, with a 3% allocation in the MSCI All Countries index.’

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Richard Philbin

Chief investment officer, Wellian Investment Solutions, London

'Being a believer in the saying “it’s a market of stocks, not a stock market” and regardless of where we are in the economic cycle, there will always be businesses that are growing faster than their peers or the market providing investment opportunities. “It’s time in the market, not timing the market” is another favourite. Putting both sayings together should make you a patient, fundamental investor.

'There will be times when different assets, asset classes and investment styles look more attractive than others and this should help with tactical asset allocations. “Where do the opportunities lie in Q2” is an open question, and without understanding risk tolerances, how can you define suitability? 

'But, pedantry aside, I would suggest taking some risk off the table. I prefer the less cyclical sectors or managers with lower beta. The value-growth ratio looks stretched, favouring value. I would argue in favour of active funds over passive, if only to avoid the losers and diversify market volatility.'

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Oliver Brown

Investment director at RC Brown Investment Management, Bristol

'As a UK equity specialist and fund manager, my focus is very much on primary opportunities that may occur in Q2. Despite the recent setback in markets, we are still seeing a good flow of primary opportunities whereby companies are looking to raise new money in order to expand their businesses.

'With economic and political uncertainty hanging over the UK, we continue to favour companies with international exposure, though we do believe we are starting to see signs of value in the UK, which has rarely been as out of favour as it is right now. We favour market leaders who have greater pricing power and can use the current market weakness to consolidate their position. 

'We see most IPOs that come to the London market and we are particularly excited about Chargemaster, the market leader in electric car charging stations. It is profitable, growing quickly and is expected to float in the next month or so.' 

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Arnaud Gandon

Chief investment officer at Heptagon Capital, London

'We would first start by looking beyond Q2 and focusing on the longer term. Managing asset allocation from quarter to quarter is relatively short-sighted and can lead to poor decision making amid the short-term noise.

'In the longer term, we are looking to invest in assets that have generally not benefitted from the QE induced stimulus of the past five years. Inversely, we look to avoid assets which have benefited most from QE, European High Yield is a prime example.

'Emerging markets (EM), both equities and debt, still look very attractive to us on a 10-year timeframe. Traditional portfolios are consistently underweight EM even though EM (including China) is estimated to contribute to more than 70% of global GDP growth in 2018. Equity valuations in the region are reasonable, earning growth is superior and some sectors offer an interesting value opportunity.'

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Graham Austin

Investment Manager at Charles Stanley, London

'The UK market looks interesting at present, given it is currently significantly under-owned by global asset allocators. Within this, underperformance of value versus growth has been stark in recent years, something we think will reverse.

'We see a number of stocks which are currently well out of favour and offering, we believe, compelling entry points. In particular some of the domestic retail names who have been heavily impacted by fears over Brexit and the death of the high street. 

'In addition, the recovery in the oil price has led to growth in earnings from some of the oil majors, who continue to offer attractive dividends and have become more streamlined in their operations in recent years, reducing the breakeven price. We like BP and Shell as two names who play nicely to this recovery.  For clients favouring a funds approach, we like Polar UK Value Opportunities and Jupiter Special Situations.'

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Peter Sleep

Senior investment manager, Seven Investment Management, London

‘The editor of Citywire must believe I wear a headscarf and an earring like Mystic Meg (no, not Captain Jack Hawkins, unfortunately) as he asks for opportunities in the next three months. 

‘There is investing for the long term and there is voodoo investing for the next quarter. If you are investing for the long term, equities show the best returns, and if you push me, maybe Japanese or emerging market equities look interesting. Trade war concerns apart, this region seems to be where the growth is, where valuations are reasonable and it represents a way for UK investors to diversify sensibly.

'If you are worried about the next three months and want to preserve capital, then there is cash; if you are optimistic about the next three months there is the National Lottery. Perhaps Mystic Meg can help you pick the numbers. I see Uranus is in the Ascendant…’ 

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Vince Hopkins

Director and head of investment management at BRI Wealth Management, Meriden

'We started the first quarter wondering what happened to volatility in markets. The Santa rally drove all markets higher but since late January reality at last returned.

'Looking forward, opportunities now appear greater despite the many heightened concerns, which were already known but investors chose to ignore in favour of continuing the bull run. Global GDP growth looks assured even if the latest figures have fallen slightly below forecasts. The fall in markets has reduced valuations and the worst performing major market continues to be the UK.

'With Brexit, politics and a lower GDP backdrop this is understandable; however, we all know the market overreacts both ways. We will be looking to correct our underweight position in UK equities prompted by value and dividend flow but would also expect to see increasing corporate activity across many sectors.

'The catalysts could well be national joy from both the royal wedding in May and England managing to get out of their World Cup group in June.'

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Tom Davies

Senior investment manager at Quartet Capital Partners, Richmond

'We have been underweight UK and US equities for some time but feel the UK is unloved and better value than many areas of the US equity market. We are likely to lift our allocation to UK equity income via an actively managed fund as the environment for passive investment is now less attractive.   

'We remain underweight bonds and therefore continue to favour income generation in Infrastructure and certain niche areas of the commercial property market that provide some inflation linking and benefit from the backing of government contracts. We think that fears of political risk are overblown, at least in the short-term, as we think it unlikely that the Conservative party will vote themselves out of office via a vote of no confidence.  

'Gold is attractive as central banks are likely to remain behind the curve on rates to allow higher inflation to help offset the huge stock of debt that exists in the system.'

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John Hair

Chief investment officer at Standard Life Wealth, London

‘There is a significant valuation gap appearing in UK markets. There are now a record number of growth stocks trading on P/Es above 20x, and also looking expensive on other measures. Simultaneously, there are an unusually high number of stocks selling on very low multiples with extremely attractive yields. Hence, the opportunity appears to lie in value/bond proxy stocks, currently unloved by the market.

‘Whether or not Brexit and the UK economy perform smoothly, it may be that valuations have run too far, driven down by frenzied media coverage and poorer economic consensus. It seems highly unlikely that the UK can totally implode while the rest of the world sails on, problem-free. 

‘British American Tobacco is trading on a forward P/E of 12.8x and a yield of 5% looks attractive compared to Philip Morris on a forward P/E of 18.2x and yield of 4.4%. An opportunistic entry point for long-term buyers?’

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