Equities

Valuations at the top end of indexes are sky high, but with that comes inflated forecast earnings. For savvy investors, it may be time to rotate towards more value-oriented stocks according to Eric Marais from Orbis Investments.

A huge benefit has already been realised in the price of the Magnificent Seven and it might be time to take some risk off the table instead of speculating on future fundamentals, according to Lazard.

The incredible performance of the Magnificent Seven mean investors aren’t always seeing the technological growth that’s driving industries like professional services, construction and medicine.

You don’t need to be a tech stock advocate to understand the importance of looking beyond the headlines and the hype, creating your own narrative based on facts, and assessing each opportunity with a clear lens.

Contrarian investors are adept at spotting misalignment that leads to arbitrage between real value and perceived value. But it isn’t easy. “True bargains are hard to come by,” says Orbis Investments’ Eric Marais.

Asian market equities stand out as a beacon for growth-oriented investors, propelled by the region’s rapid technological advancements, robust economic development and increasing integration into the global economy.

Inflation has likely peaked and the small cap market has bottomed out. The bad news is that relative returns have already started improving. The good news is that we’re still a few standard deviations from the mean, and there’s still plenty of upside.

The functionality of value investing hinges on one important and fundamental premise: that humans are fallible and emotional operators that over-react, misjudge and fall victim to overconfidence in their own assessment abilities.

The vast majority of quality asset managers will go through periods of five years of underperformance or more, which makes it difficult for that firm to take smart value bets and hold them until maturity beckons.

An elevated market is a good thing, but investors that take a valuation mindset into asset allocation need to be wary of what that means for prices. “Chasing momentum” is a real danger, says Australian Ethical’s Mark Williams.

While the small companies sector of the share market is poised to benefit from the predicted retreat of inflation, the tailwinds really kick in when you throw active management into the mix according the Invesco team.

It’s not always about finding companies that have the biggest market share or the ones that dominate the headlines. For true value investors, the key is to select companies whose forward value is fundamentally underappreciated.