Opportunities are emerging amongst crisis pressures.
Our portfolio activity has increased year to date, reflecting the need to review business models of current holdings in the context of potential coronavirus impacts. In addition, a number of attractive, diversified investment opportunities have emerged against a backdrop of increasingly narrow and concentrated equity markets. The opportunity to enhance the overall long-term growth and income-generating potential of the portfolio at attractive valuations is welcomed.
Similar to previous periods of excessive market concentration, numerous areas have been overlooked as investors have become obsessed with one sector (in this case technology and e-commerce). But opportunities abound for those prepared to stay focused and disciplined on relative value. Over the past six months we have initiated holdings in diversified growth businesses such as Abbvie (a US pharma company), Ping An Insurance and China Resources Land (insurance and real estate companies in China), Hon Hai Precision (factory automation in Taiwan), Unilever NA (consumer products in the Netherlands) and Broadcom (semiconductors and software in the USA).
These new holdings complement an already diversified global portfolio which is positioned to deliver its long-term mandate of capital growth and an above average dividend yield with real income growth.
Unprecedented pressures on dividends and business dynamics have been exerted by the current crisis, but the overall focus of the portfolio remains on companies with robust cash generation, under-leveraged balance sheets and business models exposed to growth markets such as Asia and the emerging world. This offers a differentiated exposure to positive, long-term, global dynamics. Our team-based approach capitalises on the investment experience of managers Bruce Stout (over 30 years), Martin Connaghan and Samantha Fitzpatrick (both over 20 years), as well as the resources of Aberdeen Standard Investments’ worldwide research coverage.
The importance of discipline
We recognise the importance of discipline and adherence to process, particularly during periods of excessive exuberance and emotionally-driven asset pricing. The portfolio is constructed on a “bottom-up” basis, investing in companies based on their individual merit, rather than looking at themes or sectors. The objective is a concentrated portfolio of different businesses in different industries across different markets and geographies. In effect, true diversification of capital and sources of income. To achieve this, we discuss and consider potential investments with the rest of the 16 strong Global Equity Team at Aberdeen Standard Investments. The universe of companies considered is the total research output of all of our regional fund managers and analysts, located across the globe. This currently amounts to around 2,500 potential investments, the majority of which are held in regional and country funds. From this potential investments, we select those businesses deemed most suitable to deliver the investment mandate of the Trust, paying strict attention to liquidity, quality and relative value. Over time this had led to a predominately “buy and hold” strategy, with relatively low turnover. Historical periods of high market volatility, coupled with the desire to actively manage the Trust’s gearing where appropriate (usually moving bonds into equities or vice versa) has resulted in some opportunistic increases …read more
Source:: New Statesman