Beyond US tech stocks: three global stars to buy now

There is much to like about the US tech giants, says professional investor Alec Cutler of Orbis Investments highlights. But there are many other excellent businesses out there trading at much more attractive valuations. Here are three of his favourites.

Stockmarket indices can be a poor reflection of reality. Mega-cap technology stocks in the US have had an overwhelming impact on returns, but this obscures the fact that the average global stock has only recently recovered from a hidden bear market dating back to early 2018. 

While there is much to like about the US tech giants – deep “moats” (entrenched competitive advantages that fend off potential rivals), high returns on capital, piles of cash and appealing long-term growth potential – there are excellent businesses out there trading at much more attractive valuations. Great investment ideas come in many different shapes and sizes and it always pays to cast a wide net.

A top Taiwanese chip maker

Taiwan Semiconductor Manufacturing Company (Taipei: 2330) has many of the same attractive fundamentals as its US peers. TSMC is more dominant in chip manufacturing than its largest customer, Apple, is in smartphones, yet it trades at a substantial discount to its American client. As the world’s dominant manufacturer of logic semiconductors, TSMC stands to benefit from powerful long-term tailwinds in artificial intelligence (AI), cloud-computing and 5G-wireless broadband. 

None of these technologies will be possible without leading-edge semiconductors and TSMC is one of only two remaining players who can make them. We believe TSMC can continue to grow its earnings at around 15% per annum over the long term while maintaining its very high returns on equity (a key gauge of profitability). 

A leading US health insurer

Having a new resident in the White House almost always leads to fresh debate about the future of the US healthcare system. Historically this has been a source of opportunity for investors. Leading US health insurers such as Anthem (NYSE: ANTM) have rarely traded at demanding valuations, despite delivering superior fundamentals. 

Since 2000, Anthem has delivered earnings-per-share growth of 16% a year compared with 6% for the S&P 500 index. The combined tailwinds of an ageing population, rising incomes and expansion of health coverage to more people should continue to fuel above-average profit growth. There will no doubt be considerable volatility and heated political rhetoric, but history has shown that changes in the US healthcare sector have been gradual rather than revolutionary, and the likes of Anthem are an important part of the system.

Luxury car group roars ahead

BMW (Frankfurt: BMW) is one of the world’s highest-quality car manufacturers. Of the 1,600 companies in the FTSE World Index ex-US in 1990, fewer than 80 have delivered earnings-per-share growth of more than 10% per annum since then, and BMW is one of them. It has generated a return on equity of 15% over the long term and has compounded earnings at a rate well above most businesses in any sector for several decades. 

It is a remarkable achievement and a testament to the family-controlled company’s discipline, culture and premium brand value. The pandemic has been a setback in the short term and BMW will also need to adjust to a future where electric vehicles are more common, but we are confident that the group has the expertise and financial strength to navigate these headwinds successfully over the long term. 

Recommended

The Federal Reserve wants markets to fall – here’s what that means for investors
Stockmarkets

The Federal Reserve wants markets to fall – here’s what that means for investors

The Federal Reserve’s primary mandate is to keep inflation down, and lower asset prices help with that. So, asks Dominic Frisby – just how low will st…
25 May 2022
Flexible working: don't rush your staff back the office
Small business

Flexible working: don't rush your staff back the office

The government is urging people to get back to the office. But there are good reasons for many small businesses to embrace flexible working.
25 May 2022
Let’s adjust to living with Covid and get Britain back to work
UK Economy

Let’s adjust to living with Covid and get Britain back to work

The Covid-19 era is over, leaving a stagnant and lethargic workforce in its wake. It’s time to wake up, says Matthew Lynn.
25 May 2022
Should you be worried about energy windfall tax proposals?
Energy

Should you be worried about energy windfall tax proposals?

Calls have been growing for a windfall tax on UK oil and gas producers. It's a popular idea, but is it a good one? And what does it mean for investors…
24 May 2022

Most Popular

Everything is collapsing at once – here’s what to do about it
Investment strategy

Everything is collapsing at once – here’s what to do about it

Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect th…
23 May 2022
Imperial Brands has an 8.3% yield – but what’s the catch?
Share tips

Imperial Brands has an 8.3% yield – but what’s the catch?

Tobacco company Imperial Brands boasts an impressive dividend yield, and the shares look cheap. But investors should beware, says Rupert Hargreaves. H…
20 May 2022
Three high-quality FTSE 100 shares going cheap
Share tips

Three high-quality FTSE 100 shares going cheap

As stockmarkets continue to fall, bargains are starting to appear, says Rupert Hargreaves. Here, he picks three high-quality FTSE 100 shares that are …
23 May 2022