‘Don’t worry about the world coming to an end today. It is already tomorrow in Australia’ – Charles M. Schulz
What a last week. More trade angst as the war of words spills over into more tariffs, a German government that is wobbling, higher US interest rates, a confirmation from the European Central Bank that it is holding rates below zero for another year and the usual discussions about Brexit. Roll all the above and more together and the impact on financial markets have been very clear over the last few days.
Uncertainty and challenges are just in the nature of financial markets. The reasons why outsized returns – over a reasonable period of time – versus alternatives such as money in the bank have been available in financial markets is because of the risks that need to be taken to achieve them. My own view would be that all of the above are reasonable threats today…but I could put up reasons and valid arguments why opportunities exist too.
Uppermost amongst these lay with the choice of specific investments, where the initiatives and drivers at individual companies offer scope for share price appreciation despite some bigger picture concerns. We made three decisions over the last week on behalf of the Dynamic Opportunities Fund. The first two decisions were centred on additional investments. We have noted before that healthcare is an attractive theme in a world where populations are ageing. Another expanding theme is obesity and with it issues such as diabetes. The world’s leading diabetes treatment producer is the Danish company Novo Nordisk and, we added to our position in the last week, believing that these positive thematic attributes more than offset and a continuing strong pipeline of new products offset any competitive threat from other companies active in the area.
The second position add was to the French listed construction and building products company Saint Gobain which is active in many markets around the world but, unsurprisingly given its heritage, is particularly active in Europe. Investor faith in Europe has taken a battering recently but there is still economic growth – at typically much better levels than a couple of years ago – and this will benefit sensibly run groups like Saint Gobain.
Finally, we added a new position in Jardine Matheson a Singapore listed conglomerate with a long history, solid dividend yield, near debt free balance sheet and currently trading at around a 10% discount to its stated book value. The company has interest in assets across Asia in sectors as diverse as supermarkets/convenience stores, insurance, hotels, mining and property and is effectively a good play on the ever-stronger Asian consumer.
As Warren Buffett notes ‘get greedy when others are fearful’…but after doing all the requisite investment criteria checks naturally. I am sure the world’s greatest investor would completely agree.