Last year ended on a high note for US stocks, which were in their third year of double-digit returns. Large caps were up over 20% and the S&P 500 was up over 100% over three years. However, 2022 has presented a more challenging environment. While pandemic-related risks have reduced, new headwinds such as inflation, rising interest rates and geopolitical tensions are affecting investors’ sentiment.
US equity markets have responded by rotating favour between value and growth. Except for the first quarter of 2021, when value outperformed, growth was the clear winner. Yet today, value stocks are once again outperforming as investors try to shield themselves from rising inflation and geopolitical instability. We expect markets to continue this relay, passing the baton between value and growth.
Looking ahead, we believe investors should look beyond immediate headwinds and consider the long term. It is therefore now more important than ever to focus on high-quality businesses with durable competitive advantages, which will provide stability should economic fundamentals deteriorate, or uncertainties escalate further. Our trust provides this balance through a diverse selection of high-quality value and growth names, which we believe will perform well over the long term.
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
Finding value in banking and timber
On the value side of our portfolio, we remain overweight in financials. Bank of America (NYSE: BAC) is an example of a bank that has benefited from a favourable macroeconomic environment and has continued to report strong results in spite of headwinds. We remain confident in the ability of management to grow margins through efficiency improvements, and the diversity of its business mix is another reason we like this company.
Similarly, Weyerhaeuser (NYSE: WY), one of the largest timber real estate investment trusts (Reit), has been the biggest beneficiary of the increase in global demand for timber. It is one of the largest private owners of timberlands in North America, with about 11 million acres, and managing an additional 14 million acres under long-term licences in Canada. The company manages these timberlands on a sustainable basis in compliance with internationally recognised forestry standards.
Innovation in agriculture and health
Through our growth portfolio, we are optimistic about progressive industry leaders that are investing in cutting-edge technology and artificial intelligence (AI). One such example is Deere (NYSE: DE), a global leader in the production and distribution of agricultural equipment, including tractors. The company is developing innovative technology, including the use of machine learning and AI, to increase productivity significantly. This development has strengthened Deere’s competitive leadership and should help to strengthen its long-term pricing power and profitability.
In healthcare, Intuitive Surgical (Nasdaq: ISRG) is the dominant market leader in robotic surgery, currently maintaining 79% of the global market. Through its flagship Da Vinci robot, Intuitive provides surgeons with 3D, high-definition views of the operating field and use of machine-manipulated instruments for smooth precision. These minimally invasive procedures benefit patients by ultimately reducing recovery times.
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
Best investing appsLooking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go? We round up the best investing apps
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
