A professional investor tells us where he'd put his money. This week: Tom Walker of the Martin Currie Global Portfolio Trust selects three sustainable businesses.
It feels like we've travelled a long way since the start of the year. Just over six months ago markets were reaching all-time highs, global growth looked set to maintain a steady trajectory, and companies worldwide were generally upbeat. Not even the prospect of an eventual tightening of monetary policy seemed capable of dampening investors' animal spirits. Then reality kicked in. In early February the markets suffered a sharp correction and investors began to ask questions about how much further the nine-year bull market could run.
The moment seemed to mark the point at which markets acknowledged a theme that looks set to become increasingly significant in the second half of this year and beyond namely, the two-speed nature of the world's economy. What we are now seeing, instead of a hoped-for period of aligned global growth, is the US pulling away from the rest of the world. US annual growth in 2018 is predicted to reach more than 3%, a level last seen in 2005. Meanwhile, growth is slowing in Europe, Japan, China and elsewhere.
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Diverging monetary policies
Most notably, the differing monetary-policy settings between the US Federal Reserve and other global central banks will become more pronounced. While the Fed is considering up to four rate rises this year, European and Japanese central banks are likely to continue with their accommodative stance. This disparity could introduce more volatility into markets in the second half.
While this could be a concern for short-term investors, we believe taking a longer-term view, married with a global approach to picking stocks, means we can "look through" these periods of market noise. In fact, we think that maintaining a focus on strong, sustainable business models from a range of countries and sectors is the best way for investors to find value in the markets irrespective of differences in economic cycles.
The stocks well placed to benefit
Take Accenture (NYSE: ACN), for instance. This global management-consultancy group delivers end-to-end IT solutions to the world's biggest companies. It has a history of generating solid revenue growth and improving margins and, given the company's global reach and its significant exposure to the digital economy, we believe the long-term growth prospects for the business are promising.
Mettler-Toledo (NYSE: MTD), a leading global supplier of precision instruments and services, is another firm that looks set to keep performing strongly well into the future. It has market-leading positions in all its businesses, with exciting growth opportunities in China and southeast Asia. As such, Mettler-Toledo should be able to sustain long-term revenue growth, with ample scope for expanding its profit margins.
British speciality chemicals group Croda (LSE: CRDA) also looks well placed within its industry. The firm has huge pricing power its products are often a small but key part of many finished products. What's more, its new plant, Atlas Point, which is based in the US, is able to make products that are hugely valuable to some of the sustainable brands that Croda supplies, as it allows these brands to stamp their products as being certified as "bio-based" by the US farm regulator, the USDA.
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