Glimpses of silver lining in US equities

Added 7th September 2015

Despite growing investor pessimism, positive market fundamentals in the US remain intact – supported by low interest rates, tame inflation and comfortable valuations, Tristan Camp, investment specialist of Legg Mason Global Asset Management said in an interview with Fund Selector Asia.

Glimpses of silver lining in US equities

He said that the current volatility in the US market remains largely tied to Asian and European markets, which dropped on a disappointing reading of Chinese manufacturing.

“We are experiencing volatility [in the US market] that is not tied to fundamentals; the market is instead driven by technical [analysis],” Camp said.

Camp noted that the forthcoming cycle in the US would pursue a well-known pattern. Moderate inflation and a soundly growing US economy will provide a stable environment for the Fed to start raising the federal funds rate, an event likely to take place in October this year.

Camp’s strategy, in this present climate, is to add value to existing companies that can deliver quality growth in a three to five year term. He is optimistic when considering equities in the healthcare sector – albeit exercising great caution when it comes to stock selection. Camp prefers healthcare companies with a concentrated offering as opposed to those with broad-spectrum products.

He cited one company that develops and manufactures therapies for people living with serious neurological, autoimmune and hematologic disorders, as an example of a business that excites him.

“This is a company with a good balance sheet. It has no debt and has significant cash flows to continue to invest in research and development. The stock is at present trading below market value,” Camp said.

Camp also noted that there are opportunities in the energy sector amid on-going rationalisation efforts.

“A lot of supply is going to be taken out of the sector and those with a strong balance sheet will emerge stronger from the sell-off,” he said. “But this sector is a controversial one. You cannot expect to see returns next month. [Your investment] in quality growth businesses [will likely] start to pay off only after three to five years,” Camp added.

Legg Mason’s Clearbridge US Aggressive Growth Fund is overweight in the healthcare and energy sectors, while it is relatively underweight in the industrials and consumer staples segments. 

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