RE:CM finds value in healthcare, telecoms and tech shares

While the majority of market participants continue to chase stocks in fast growing global industries such as commodities and social networking, one fund manager says good value can be found in three global industries that are currently seen as unsuitable for investment by the majority of investors because they seemingly cannot grow fast enough - namely Healthcare, Telecommunications and Technology.

Daniel Malan, Investment Director at RE:CM, says the most important consideration to achieve long-term capital growth is to pay a lower price to that of value. “For example, an investor who invested in global tobacco businesses 10 years ago would’ve received an excellent return, because they would have paid a very low price for the shares in that particular industry, but at the time it was the general belief that tobacco businesses could not grow anymore.”

Malan says that while RE:CM’s portfolio managers compile portfolios by comparing individual high-quality shares on the same scale, from time to time certain themes present themselves as is currently the case with these three sectors.

He says that among others, RE:CM’s clients’ funds include businesses such as: Johnson & Johnson, Wellpoint, Dell, Tokyo Gas, BP Plc, Titan Cement, Sonic Healthcare, Vodafone, Walmart Stores and H&R Block.

“These businesses meet our three key criteria for investment in that they are individually the best or of the best quality in their respective industries, they are cheap on an absolute basis compared to our estimates of intrinsic value and they are currently seen as an unpopular investment by investors. We know through two decades of practical experience that investors who emphasise these factors in their investment approach can achieve attractive returns over full market cycles.”

Malan says it is no coincidence that most of these companies are listed on developed market bourses. “It is our firm belief that good value can presently be found in businesses that are listed on securities outside of South Africa, more specifically in developed markets such as the USA, Europe and Japan. This is contrary to the more enticing options in fast-growing emerging markets such as China and India as well as markets in which there is great exposure to businesses operating in the natural resources sector, such as Russia and Brazil.”