As Barack Obama reaches his 100th day in office, M&G says investors should not overlook the unrivalled breadth of opportunity in the US equity market.
Although the S&P 500 index dropped 22%* in Obama´s first 50 days in office, it has since regained that loss. Aled Smith, manager of the M&G American Fund (ISIN GB0030926959), says dialogue between governments suggests that much has been learnt from the protectionist mistakes of the past.
“The current bear market is the second most savage in the history of US equities with the peak to trough falls experienced exceeded only by those of the Great Depression. But the continuing dialogue between national governments, a process that Barack Obama has been pivotal in, suggests that lessons have been learnt from history and that there is a desire to not make the same mistakes made in the 1930s.
“Investors should not forget the unrivalled breadth of the US equity market and the proven ability of US companies to maximise shareholder wealth. Although market noise is likely to remain high in the short term, presenting the potential for bouts of short term disappointment, for those able to see through it and take a long term view valuations are compelling. Moreover, these opportunities can be found right across the market."
Two examples of companies Aled invests in are:
- Google, the internet search giant has appointed a new CFO who is placing a greater emphasis on the importance of reducing costs, fostering a cost conscious culture within the company which has been missing thus far as the company focused on aggressive growth. That said, this has not come at the expense of the company´s growth prospects. The company has already invested a lot of capital in developing the next generation of web based services and software platforms such as its Android mobile phone user interface. The company´s current valuation gives no recognition to the potential monetisation of any of these products.
- Coca-Cola, soft drinks company and the world´s most recognised brand, has seen its value fall as investors have chosen to judge the company based on falling sales of carbonated soft drinks, particular in its home market. However we believe that the true value of the company lies in the unequalled reach of it´s distribution business. This enables the company to maximise the opportunities presented by higher growth products, such as its vitamin water offerings. This should enable the company to sustain the high returns that it has generated for many years.
Aled continues to see strong investment potential among:
* Source: Bloomberg.com
