almost 3 years ago • 3 mins
Four times a year, data giant Bloomberg asks a bunch of professional investors where they think the biggest opportunities lie at present. Their responses often throw up investment ideas off the beaten track – and I thought three of the current crop in particular were worth a closer look.
One fund manager from Legal & General favors an alternative angle to the ongoing value-stock shift: backing infrastructure firms running airports, railroads, toll roads, and energy pipelines.
His two-part thesis is pretty simple:
1️⃣ Coronavirus vaccine rollouts mean economic activity will soon pick up, boosting demand for goods and services and therefore growth at freight railroads and freeway operators. Travel’s resurgence should also see beaten-down airport earnings pick up.
2️⃣ Infrastructure stocks haven’t looked this cheap relative to their actual assets in over a decade. Their price-to-book ratio is currently 40% cheaper than the market average: in theory, any uplift in these companies’ earnings should translate into an even bigger uplift in their share prices.
Perhaps unsurprisingly, the founder of startup funder MacDonald Ventures thinks angel investing’s an exciting area right now. Historically, only those able to write $50,000+ checks could finance companies at such an early stage – nowadays, however, investor networks and crowdfunding platforms allow people to invest much smaller sums.
The potential gains are great, but so are the risks: professional angels recommend spreading yourself across multiple smaller investments in order to maximize your chances of backing the next Uber and making a mint. You also need to have the very long term in mind – don’t expect to see any return on your investments for at least eight to ten years.
One money manager at Brazil’s Itau Unibanco is betting that company earnings growth will be weak around the world over the next few years – but that stocks in countries like Singapore, Indonesia, Vietnam, and India will buck the trend thanks to several supportive factors.
Two of these factors look especially intriguing:
1️⃣ Education: the average education spend across Asia is higher than in other emerging markets, but the provision of things like universities is still in its infancy – creating lots of opportunities for educational companies and their investors.
2️⃣ Finance: financial products like insurance remain underrepresented in the region. The increasing penetration of more formal financial systems offers growth prospects for both established players and startups.
The analysis here is admittedly less hard-hitting than in a typical Insight. Nevertheless, these new ideas are timely. Stock markets hit fresh record highs last week, and while bond yields have risen a little recently they remain close to record lows.
In other words, sources of potential outperformance are pretty scarce right now. So if beating the market sounds like a challenge you’re up to, this Insight may point to a few places that at least warrant further research. Check out the related content below for starters: there are deep dives there on several of the topics mentioned above.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.