Tom Walker, the long-serving manager of the Martin Currie Global Portfolio investment trust, has revealed the stocks he is buying to find growth in the world right now.
Walker’s fund has returned 65 per cent over the past five years, compared to 35 per cent for the average trust in the AIC Global Sector in the same time period.
He remarked, ‘A year ago, on balance, investors were most worried about the extended valuation of equities. Today, their greatest concern is probably the lack of global economic growth. Despite the efforts of so many central banks to stimulate it, the weak oil price and collapsing sovereign bond yields confirm what we read in the news everyday – growth in the underlying economies is not lacking. Easy money has boosted asset prices, but done nothing to lift businesses’ confidence to make long-term investments to expand their operations. For many companies, cash flow has been strong, but this has been utilised more in share buybacks, dividends, and merger and acquisitions rather than in growth initiatives. This process could continue, allowing stock markets to make modest progress. However, interest rates are already very low and in many countries negative. The scope, therefore, for shocking the economy into growth with lower rates is nearly exhausted. New ideas are required and the risk is that the credibility of central banks is now severely damaged, and investors will ignore the policy statements until the hard evidence of improved growth is apparent. In recent years, the mere announcement of a round of quantitative easing was enough to push markets higher. This may no longer be the case.’
One stock on which he remains keen is Facebook, an investment he made duting 2015.
He said, ‘It continues to impress, gaining share in the advertising space, and we believe its apparently rich valuation is justifiable’
Walker continued,‘Two long-term outperforming holdings include L Brands – better known on the high street as Victoria’s Secret – and defence contractor Lockheed Martin. It’s worth noting that BG Group, which was bid for by Shell during the period, was also in the top 10 positive contributors despite the fallout in the oil and gas sector from falling energy prices. The market collapse in August presented an opportunity to buy ARM Holdings, the UK microprocessor giant. We also added Japanese telecom-network operator KDDI, which provides reasonable growth in a low-growth world, at an attractive valuation level. As a result of stock activity in the portfolio, we have less exposure to Europe than a year ago, and have reduced weights to industrials in favour of technology and telecoms.’
He concluded his comments by saying, ‘While growth looks really challenged when dealing in the generalities of stock market averages or GDP, there are clearly individual companies and specific niches within economies that will continue to grow well. There are also companies enjoying modest growth at valuations that remain attractive. We expect the year ahead to be one of low growth, low inflation and low interest rates. It will be a year that challenges advance in global equity markets. However, we believe this is also an environment that will throw up opportunities and where, by choosing companies wisely, reasonable returns for shareholders can be achieved.’