Equities

The benchmark core equities sector is a fundamental sleeve in any sophisticated portfolio. Most profess top quartile returns, but which five have genuinely outperformed the market over a three year term?

“I wouldn’t employ someone from a growth house and try to turn them into a value investor,” says Rich Pzena. “It doesn’t work, they’re different people.”

Most managed funds simply hold too many stocks to provide reliably effective returns for investors, according to Claremont Global head Bob Desmond, who says a quality, high-conviction strategy makes diversification less crucial.

Despite strong fundamentals for the chip king, Research Affiliates says investors are overplaying Nvidia as the ‘safe’ hand in the AI game.

Edinburgh-based Dundas Global Investors sees dividend growth, rather than dividend income itself, as the key to long-term outperformance. The numbers bear out the wisdom of that approach.

Companies were largely able to pass cost increases on to the surprisingly resilient Australian consumer, allowing them to defend profit margins, while retail continued to defy analysts’ expectations of a downturn.

Brokerages raising their target price on Nvidia shares this month have pushed the median view to US$500, and analysts say that may be conservative. After an impressive earnings report, hedge funds and others are piling into the chip maker even as high bond yields threaten tech stocks.

Small caps are coming back from a tough year, while opportunities abound in the IPO market and founder-led businesses according to Ausbil small and microcap portfolio manager Arden Jennings. 

Focussing on a concentrated portfolio of quality and growing stocks can expose investors to strong profit growth and some of the best companies in the world, Claremont Global’s Bob Desmond said at the Inside Network’s recent Investment Leaders Forum. It just requires thinking through the noise and understanding a company’s culture.

Technology stocks at the big end of the S&P500 have enjoyed a (mostly) golden run, but Atrium Investment’s Brendan Paul warns that Nvidia’s astronomical valuation may have tipped the balance.

After a three-month run as the most-traded ASX stock on Selfwealth’s platform, Neuron Pharmaceuticals ceded its spot to CBA in June as healthcare, mining and banking stocks jostled for investors’ attention.

High payout ratios and non-cyclical price falls are some of the red flags investors need to be wary of. A selection of portfolio managers reveal what they look out for, and try to avoid, when hunting for value stocks.