'American Chevron today is an opportunity'
"Other companies that I find interesting include China's Catl, Norway's Var Energi and the US-based Plains Gp."
Key points
Jacob de Tusch-Lec, manager of the Artemis (Lux) Funds Global Value strategy, takes a clear-eyed snapshot of the current state of the markets. He identifies still-attractive segments such as pharmaceuticals or emerging countries among the geographic areas, but all within a volatile situation dictated by a climate of uncertainty that, as such, induces one to move with caution.
The volatility of the stock markets is very high at the moment. What are your considerations?
In the current volatile environment, an active value manager looks for good opportunities. Financials carry a lot of weight due to low multiples; attractive prices can also be found in pharmaceuticals and infrastructure. Energy remains attractive, although it is difficult to model the price of oil after the rise due to the conflict in Iran. Geographically, emerging markets still offer opportunities due to structural factors, demographics and low debt. Secular growth cycles often end in rapid collapse: those with little exposure to value should consider rebalancing.
Do you think geopolitical tensions have already been discounted by the markets?
With conflict and new fears, the challenge remains to preserve gains in an uncertain environment. March saw a sectoral rotation: energy stocks on the rise, banks suffering from stagflation and credit fears; much of the momentum was driven by the reversal of momentum stocks. Some movements were counter-intuitive: defence, copper and gold offered no protection in the conflict with Iran, probably because they were coming off strong gains. Market structure plays a central role: retail investors, hedge funds and ETFs influence prices to the detriment of active managers. The concentration of flows makes market movements less articulated at turning points.
And which geographical areas currently offer attractive investment opportunities?
The US represents a historically high share of the global index; matching would result in about two-thirds exposure to the US, a share that is excessive due to the high concentration in the expensive technology sector, which could generate losses in the event of a correction. Emerging markets, particularly China, offer interesting opportunities: low expectations do not require extraordinary performance for good results. Moreover, they have favourable structural factors, such as positive demographics and low household debt.
Where do you stand?
In the past, the market penalised mining companies for high fixed assets, favouring software companies for their light structure. Today, many technology companies are becoming asset-heavy by financing themselves with debt, while mining companies are reducing debt. This indicates that price/earnings multiples may partially converge. Therefore, manufacturing companies, which produce assets and generate solid profits, suddenly appear safer.
