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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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.
Alec Cutler, Bachelor of Science (Honours) in Naval Architecture (United States Naval Academy), Master of Business Administration (The Wharton School of the University of Pennsylvania), Chartered Financial Analyst. Alec joined Orbis in 2004. Based in Bermuda, he leads the multi-asset team, is one of the Portfolio Managers for the Orbis Global Balanced Strategy, and has overall responsibility for the Strategy. He previously worked for 10 years at Brandywine Asset Management LLC managing the Relative Value strategy, co-managing the Large Cap Value area and co-managing the firm as a member of the Executive Committee.
-
Stamp duty calculator: how much of a UK sold house price is taxed?
Our stamp duty calculator shows you how much the tax will cost you, depending on which band the house price you’re paying falls into.
By Henry Sandercock Published
-
Investors return to equity funds – green shoots or end-of-tax-year blip?
Equity funds saw net inflows in March for the first time in over three years. What’s driving this behaviour, and which regions are proving most popular?
By Katie Williams Published
-
Top-quality, rapidly growing European stocks are selling at enticing valuations
Timothy Lewis, portfolio manager at JPMorgan European Growth & Income tells us where he’d put his money
By Timothy Lewis Published
-
AstraZeneca CEO’s £1.8mn pay rise approved despite shareholder opposition
AstraZeneca hiked its dividend to persuade shareholders to accept CEO Pascal Soriot’s pay rise. Is he worth his salary?
By Dr Matthew Partridge Published
-
Adidas, Nike or Jordans - could collectable trainers make you rich?
The right pair of trainers can fetch six figures. Here's how you can start collecting vintage Adidas, Nike or Jordans now
By Chris Carter Published
-
The industry at the heart of global technology
The semiconductor industry powers key trends such as artificial intelligence, says Rupert Hargreaves
By Rupert Hargreaves Published
-
Three emerging Asian markets to invest in
Professional investor Chetan Sehgal of Templeton Emerging Markets Investment Trust tells us where he’d put his money
By Chetan Sehgal Published
-
What to consider before investing in small-cap indexes
Small-cap index trackers show why your choice of benchmark can make a large difference to long-term returns
By Cris Sholto Heaton Published
-
Why space investments are the way to go for investors
Space investments will change our world beyond recognition, UK investors should take note
By Merryn Somerset Webb Published
-
Time to tap into Africa’s mobile money boom
Favourable demographics have put Africa on the path to growth when it comes to mobile money and digital banking
By Rupert Hargreaves Published