Three Investing Ideas From Three Of The World’s Top Investors

Three Investing Ideas From Three Of The World’s Top Investors
Carl Hazeley

over 2 years ago3 mins

    • Research Affiliates thinks value stocks are currently screening as momentum stocks, which should provide a fresh leg of potential upside.
    • BlackRock sees further potential upside in value stocks by focusing on those with a quality and cyclical bias.
    • TS Lombard suggests buying value stocks that can pass on price increases to customers – namely consumer staples and materials firms – while selling tech and consumer discretionary stocks.
  • Research Affiliates thinks value stocks are currently screening as momentum stocks, which should provide a fresh leg of potential upside.
  • BlackRock sees further potential upside in value stocks by focusing on those with a quality and cyclical bias.
  • TS Lombard suggests buying value stocks that can pass on price increases to customers – namely consumer staples and materials firms – while selling tech and consumer discretionary stocks.

Mentioned in story

If you’re wondering where to invest next, this is a good place to start: some of the world’s top investors have been sharing their best ideas with Bloomberg.

💡 Idea 1: A value x momentum play

This idea comes from Research Affiliates, which reckons buying value stocks – those whose prices are cheap relative to their fundamentals – is still the way to go.

Although that’s been the consensus trade of the last eight months or so, Research Affiliates reckons value stocks are now becoming strong momentum stocks too – that is, those that have been performing well over the past few months. And when value and momentum strategies are heading in the same direction, the firm argues it’s a potentially powerful buy signal.

🏓 How to play value x momentum via ETFs

  • Roundhill Acquirers Deep Value (ticker: DEEP), expense ratio 0.8%
  • Alpha Architect U.S. Quantitative Value (ticker: QVAL), expense ratio 0.49%
  • iShares MSCI USA Value Factor (ticker: VLUE), expense ratio 0.15%.

💡 Idea 2: A value x quality play

This idea comes from BlackRock, which advocates sticking with two stock market themes: cyclicals and value. That’s because the rise of more speculative value stocks is stalling.

BlackRock, then, thinks investors should respond by selling off their higher-volatility value stocks in favor of higher-quality cyclical stocks – i.e. companies with high profitability and consistent earnings, like banks and mining firms.

🏓 How to play value x quality via ETFs

  • Distillate U.S. Fundamental Stability & Value: (ticker: DSTL), expense ratio 0.39%. This ETF screens for quality by excluding stocks with fewer than five years of cash flow data, scores the remaining companies on debt and cash flow, and then holds the 100 top-scoring of them.

💡 Idea 3: A value adjustment play

Now, this idea – which came from strategists at TS Lombard – wasn’t among those shared with Bloomberg, but it’s along the same lines. By TS Lombard’s reckoning, we’re now past the peak of the global economic recovery in terms of growth rates, which means it’s time for you to be more selective in your stock picking.

The firm believes that value stocks and those that can pass rising commodity prices on to their customers are best placed for the next phase of growth. So it’s recommending that global investors globally go long materials firms versus short tech, and long consumer staples versus short consumer discretionary stocks.

Here’s why: materials shares tend to outperform when commodities’ prices are rising faster than stock prices, which could offer the sector some upside. The expensive-looking tech sector, meanwhile, could see its share prices depressed by profit-taking and disappointing near-term outlooks.

As for consumer staples, the sector’s more attractively valued than discretionary names. It’s also historically had more stable earnings, which suggests firms can manage higher costs, while discretionary companies are more exposed to profit margin pressures.

🏓 How to play TS Lombard’s value adjustment via ETFs

  • iShares Global Materials (ticker: MXI), expense ratio 0.45%
  • iShares Global Tech (ticker: IXN), expense ratio 0.46%
  • iShares Global Consumer Staples (ticker: KXI), expense ratio 0.46%
  • iShares Global Consumer Discretionary (ticker: RXI), expense ratio 0.46%
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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.

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