Brian Arcese, portfolio manager and analyst at Foord Asset Management, believes that we are in one of the tightest stock markets in history where it is mainly US technology stocks that are driving the rise.
– Both valuations and financial indicators are flashing red, Arcese tells CNBC Street signs of Asia.
– Investors should be in a more defensive position in their portfolios at the moment. Partly because the market is expensive, even after the marked drop we saw earlier in August, he says.
The manager says shares are now trading at more than 18 times 2024 earnings per share. stock.
– That is 10 to 12 percent above the average and we are also entering a period of lower growth, he says.
He points out that leading indicators such as car loans and credit card debt have shown signs for several months that the economy is shrinking. The previously conflicted labor market is also present it began to slow down in the US. The number of new jobs is falling and the number of unemployed people is increasing. There are typical signs that the economy has already slowed down, according to Arcese.
Defensively, but double digits
To overcome this, he is targeting companies with defensive growth, he tells CNBC.
– You have to take risks. You have to invest somewhere. But for us it makes sense to position ourselves a little more defensively, given how expensive the markets are at the moment. And besides that there are the risks that we see in the market in general, says Arcese.
– And the positive thing is that you don’t have to sacrifice growth to position yourself defensively.
He believes that you can still invest in companies that deliver double-digit growth. Such stocks may not be as interesting as AI companies, but they are still growing fast, and they are much more defensible. Examples of this are health and public services.
Stock options
Roche: Arcese noted that the Swiss drug company’s revenue growth beat estimates by 1.5 percent, driven by strong performance in drugs and diagnostics.
SSE: Arcese says the renewable energy company has a high-quality power portfolio that includes a mix of wind, hydro and thermal resources.
– This company offers diversification to our portfolio and is not dependent on energy prices, he says, adding that the company trades at an attractive price/earnings multiple of 11 times.
Edison International: Arcese says this utility trades at a 20-30 percent discount to the S&P 500, depending on whether technology is included or not.
From the menu: He says that this distributor of tobacco products offers “excellent protective growth.”
– The company’s operations are very stable, and they support a dividend yield of more than 7 percent that grows at least in line with inflation, he says.
The share has grown by more than 10 percent annually over the past five years, according to Arcese.
2024-08-22 09:28:32
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