Remaining resolute amid market uncertainty
6 minute watch
Jamie Ross, Portfolio Manager of Henderson EuroTrust, provides an update on the Trust, highlighting how he is navigating this volatile market environment, areas where he is finding opportunities, and how companies are dealing with higher input costs. Jamie also touches on what the war in Ukraine might mean for the energy transition.
- We are using this difficult environment for quality-growth stocks as an opportunity to move further toward this style bias. Simply put, we are finding opportunities to buy what we see as high-quality, long-term investments at reasonable valuations.
- Across the board, companies are experiencing margin pressure, stemming from higher labour, freight, and energy costs. However, quality companies with strong pricing power have been able to pass on these rising costs.
- Growth/quality stocks have struggled because the combination of high interest rates and inflation impacts the multiples which investors are willing to pay for these stocks. As the discount rate goes up, the valuations of these stocks go down.
Growth stock – A growth stock is any share in a company that is anticipated to grow at a rate significantly above the average growth for the market. These stocks generally do not pay dividends. This is because the issuers of growth stocks are usually companies that want to reinvest any earnings, they accrue to accelerate growth in the short term.
Multiple – A multiple measures some aspect of a company’s financial well-being, determined by dividing one metric by another metric. Metrics are quantitative tools that measure a company’s performance. The metric in the numerator is typically larger than the one in the denominator. Investors use multiples to quantify a company’s growth, productivity, and efficiency.
Valuation metrics – Metrics used to gauge a company’s performance, financial health, and expectations for future earnings eg, price to earnings (P/E) ratio and return on equity (ROE)
Please read the following important information regarding funds related to this article.
- If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio that is diversified across more countries.
- The Company may have a particularly concentrated portfolio (low number of holdings) relative to its investment universe - an adverse event impacting only a small number of holdings can create significant volatility or losses for the Company.
- Where the Company invests in assets that are denominated in currencies other than the base currency, the currency exchange rate movements may cause the value of investments to fall as well as rise.
- This Company is suitable to be used as one component of several within a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested in this Company.
- Active management techniques that have worked well in normal market conditions could prove ineffective or negative for performance at other times.
- The Company could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Company.
- Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
- The return on your investment is directly related to the prevailing market price of the Company's shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Company. As a result, losses (or gains) may be higher or lower than those of the Company's assets.
- The Company may use gearing (borrowing to invest) as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incurred by the Company can be greater than those of a Company that does not use gearing.