Perspectives Blog

Three investments that could return to favor in 2014

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | December 16, 2013

…ws The three criteria we look for in identifying an out of favor asset class or investment strategy Why Japanese stocks, EM stocks and active equity strategies may soon be rediscovered When investors lose confidence in an asset class, especially one that had been popular enough to attract outsized allocations, subsequent rebalancing generally leads to prolonged periods of underperformance. Technology stocks after 1999, for example, underperforme…

Should investors care about valuation?

Rich Rosen, Portfolio Manager | November 25, 2013

…s worth Many of the market experts paraded around on the business programs, when asked about their forecast for stocks, often begin with a comment about valuation. But really, how effective is valuation as a gauge for determining whether it is a good time to invest in stocks? What does valuation mean anyway? The most common measure of valuation starts by looking at the market’s P/E, or how much investors are presently willing to pay for one doll…

Thoughts on navigating market volatility in today’s technology markets

Rahul Narang, Senior Portfolio Manager | April 28, 2014

…and Internet. In recent weeks there has been a dramatic shift in alpha generation from hyper growth technology stocks to more value-oriented names. We can attribute this to a number of factors: 1) improving economic data means a lower multiple for hyper growth stocks and higher multiples for value/cyclical names; 2) Fed Chair Janet Yellen’s reaffirmation of the taper; 3) geopolitical upheavals; 4) prime brokerage data suggests that hedge funds…

A less certain world favors high-quality stocks

Philip Dicken, Head of European Equities, Threadneedle International Ltd | October 6, 2014

…d the bond proxies to perform so well this year. We surmised that some of the more domestically-focused European stocks would outperform as the economic recovery became more embedded — a reasonable assumption given what has happened in other developed markets in recovery mode, such as the UK Therefore, we started 2014 with a bias towards higher-quality, domestically focused stocks in areas including financials, transport and leisure, media, and s…

Could tapering be good for stocks?

Fred Copper, Senior Portfolio Manager | December 16, 2013

Despite all the discussion surrounding quantitative easing (QE), there has been little theoretical justification for the link between QE and equity prices. Europe provides a glaring counter-example of the impact of central bank policy on financial markets. Once the psychic umbilical cord of QE is cut (tapered), the market may actually be cheered by the end of what has always been perceived as a temporary and extreme form of life support. Few i…

Building wealth through dividend investing

February 18, 2014

…,  dividends have been an important component of total return, with the best opportunity for total return in the stocks of high-quality companies that can sustain and grow their dividend over time. Higher quality stocks act to mitigate risk and offer downside protection during times of market stress. By Scott L. Davis, Senior Portfolio Manager, and Michael S. Barclay, CFA, Senior Portfolio Manager How can investors build wealth over time and con…

Beware of earnings gimmicks

Jason Wang, Senior Quant Analyst | March 10, 2014

…eporting choices and backed by actual cash flows. Academic literature (Sloan 1996; Richardson et al. 2005) shows stocks with disproportionately wide gaps between cash flows and reported earnings have lower future returns. Our own research confirms these findings. Stocks with the lowest accounting accruals outperformed their benchmark by 2.7% per year between 1993 and 2013. On the other hand, stocks with the largest level of accruals underperforme…