America: Land of investment opportunity?
Wednesday, 29 April 2009 01:17
Barack Obama has reached the milestone of 100 days in office, inspiring commentators all over the world to ponder on his achievements since being sworn in on January 20th.
Of course, at the crux of his successful campaign was a pledge to fix the financial crisis and restore the US to its position as an economic powerhouse.
But how do investment experts rate the US after Obama's first 100 days and do they see any opportunities to benefit from an upturn?
Sheridan Admans, investment adviser at The Share Centre, says: "One way the US government is seeking to encourage economic growth is by filtering capital into the economy via infrastructure-based projects. Obama has already set aside $27.5 billion for highway construction, and $20 billion for air, rail and public transportation.
"As such infrastructure funds, considered defensive as they invest in companies that own, control develop or construct infrastructure like airports, tolls and utilities, may prove to be attractive option for investors.
"Other areas of the US economy reformed by Obama's plans include the healthcare and energy sectors. As such funds that favour these sectors could offer another potentially lucrative opportunity for investors in the long term.
"It is clear that, for investors willing to accept moderate risk over the long term, America could still be the land of opportunity."
The Share Centre recommends First State Global Listed Infrastructure A Inc Fund, which invests in a diversified portfolio of listed infrastructure and infrastructure-related securities from around the world, with 31.50 per cent of its asset weightings in North American equities.
The fund is rated 'A' by Standard & Poor's, and currently yields 4.55 per cent, although The Share Centre warns inflation protected income is not guaranteed.
Another fund recommended by The Share Centre is Schroder US Small and Mid Cap Fund, which primarily invests in equity securities of small and medium-size US companies from a diverse range of sectors, including utilities healthcare and energy.
The fund's greatest strength, according to The Share Centre, is manager Jenny Jones, who has a solid reputation and has led the fund to outperform the S&P 500 index in the final quarter of 2008.
Investors should note, on June 1st 2009, Schroder's is changing the name of the fund to Schroder US Mid Cap Fund to better reflect the way the fund is managed.
Finally, The Share Centre recommends the Neptune US Opportunities Fund, which mainly invests in larger Cap companies. As at the end of February 2009 the fund favoured healthcare and energy sectors.
Cormac Weldon, head of US equities for asset management firm Threadneedle, says the recession in the US is set to continue for some time, but there is light at the end of the tunnel for investors.
"The US labour market is one of the most flexible in the world and US companies in areas such as technology have good recent experience of cutting costs," he says.
Many companies are undervalued and this is a good opportunity to pick up cheap stocks, Threadneedle says.
"Some well managed companies that happen to operate in cyclical industries are being priced as though they will never grow again.
"Clearly, this represents an opportunity. We will continue to add to good quality, cheaply valued cyclicals when opportunities present themselves," Mr Weldon says.
The firm claims its own American and American Select Funds outperformed the S&P 500 by 8.2 per cent and 9.4 per cent respectively in the first quarter.
Threadneedle also believes the dollar will strengthen.
"The new administration appears to be taking a more positive stance towards the currency and seems keen to preserve its status as the world's reserve currency of choice," Mr Weldon says.
However, Mark Dampier from Hargreaves Lansdown has reservations about investing in the US.
"America is a contradiction - it's got great entrepreneurs but I have a problem with American funds that don't perform that well," he says.
"There has been a huge shift from West to East. I look at where China is and it seems to me it is where America was between the wars.
"I think you have to go where the capital, and the industrialisation, is - and that is in the emerging markets."
Mr Dampier says when the housing market starts to pick up investors can expect a surge in the stock markets, but this could be just a "bear market rally" and stocks could lose ground once again.
Sarah Routledge
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