Three global growth plays to buy now

Each week, a professional investor tells us where he’d put his money. This week, Mark Whitehead of the Securities Trust of Scotland selects three high-quality firms that can keep growing when central banks raise interest rates.

The most recent bull market has already been one of the longest in history, lasting for almost nine years. Until this week, it hadn't shown any real signs of running out of steam. Indeed, 2017 was the first time in the 30-year history of the MSCI AC World index that it posted a gain in every month of a calendar year.

There are reasons to be cautiously optimistic about the year ahead, as synchronised global growth looks set to continue and corporations appear confident. However, the key question is whether global growth (and corporate profits) will be sustainable as the central banks wind down quantitative easing.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

We believe this year will see strong economic growth, which should support profits. Despite rising interest rates there is still stimulus to support risk assets. What's more, global earnings growth revisions have made an explosive start to 2018 the strongest, in fact, for five years.We need strong earnings to underpin equity markets particularly the US, which continues to look expensive.

We will be watching equity markets closely as investors digest rate increases and the gradual reduction in central-bank support. I believe that high-quality, dividend-paying equities with sustainable growth will remain one of the most attractive avenues for investors as we make the transition into a world with less accommodative monetary policies. Taking a global approach is the best way to identify these stocks.

Advertisement
Advertisement - Article continues below

Well placed to grow

For instance, Manulife (Toronto: MFC), the Canadian insurance and financial services multinational, looks well placed to grow its Asian and wealth-management operations. The firm's balance-sheet quality is improving as it reduces exposure to capital-intensive legacy-product lines, thus freeing up capital to invest in other areas, including Asia. This region is a key growth market for Manulife due to under-penetration of financial products.

Profit from rising energy demand

Meanwhile, in a very different sector, we see the French industrial conglomerate Schneider Electric (Paris: SU) as another high-quality stock with sustainable dividend-yielding characteristics. We believe the company's organic revenue growth is improving, driven by the better economic environment, as well as new technologies. Schneider is a leader in the management and automation of energy, and energy demand is growing as the economy uses more and more data. This stronger demand growth, combined with operational leverage (see page 10), should prove positive for sustainable dividend growth.

A solid dividend yield

Elsewhere, banking giant HSBC (LSE: HSBA) offers a high, but safe dividend yield. We believe the company is close to the end of its restructuring and cost programmes and has transformed itself following the global financial crisis of 2007-2009, leaving it with a much stronger capital position and leaner business model. The bank also carries a substantial amount of short-term liabilities or customer deposits in US dollars. That will be beneficial asUS interest rates rise further, as thiswill drive stronger deposit returns, and help to drive future dividend growth.

Advertisement

Recommended

Visit/investments/stocks-and-shares/share-tips/600641/share-tips-of-the-week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Jan 2020
Visit/519913/share-tips-8-stocks-for-robust-returns
Share tips

Share tips: eight stocks that should deliver robust returns

Ryan Ermey of US publication Kiplinger’s Personal Finance chooses his favourite stocks for the next decade, which should be able to grow for years.
28 Dec 2019
Visit/519724/share-tips-of-the-week-166
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
20 Dec 2019
Visit/519436/share-tips-of-the-week-165
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
13 Dec 2019

Most Popular

Visit/investments/commodities/gold/600686/gold-and-silver-bull-market-2020
Gold

Want to make money in 2020? Gold and silver are looking like a good bet

If you want to make money from investing, says Dominic Frisby, it’s simple: find a bull market and go long. And in 2020 gold and silver are in a bull …
22 Jan 2020
Visit/economy/600691/money-minute-friday-24-january-the-key-to-uk-interest-rate-cuts
Economy

Money Minute Friday 24 January: the key to UK interest-rate cuts

Today's Money Minute looks ahead to the release of data that could hold the key to UK interest rates cuts. 
24 Jan 2020
Visit/economy/600690/money-minute-thursday-23-january-european-interest-rates
Economy

Money Minute Thursday 23 January: European interest rates

In today's Money Minute we look ahead to Christine Lagarde's second interest-rate-setting meeting at the European Central Bank.
23 Jan 2020
Visit/investments/funds/600697/how-the-boom-in-passive-investing-could-create-better-run-companies
Funds

How the boom in passive investing could create better-run companies

ESG investing, or "ethical investing" as it used to be called, is mostly about the marketing, says John Stepek. But it's not all bad.
24 Jan 2020