Pragmatic investors need to be alert for well-managed companies with the business models and balance sheets to take advantage of three dynamics, says Pengana Australian Equities fund manager Rhett Kessler.
The first is the US economy’s ability to consistently re-invent itself, combined with the potential of becoming energy self-sufficient due to its recently accessible oil shale reserves.
The second is that the Chinese authorities’ efforts to reinvigorate (or at least stabilise) economic growth may be successful.
The third factor is that the significant reduction in interest rates domestically may be creating a base for consumer confidence, Kessler says.
Investors need to focus on companies with resilient business models that have the balance of power over their suppliers and customers, say Kessler. His examples include:
Ryman Healthcare, with high-quality aged care facilities and capital-efficient business model
Resmed with its dominant global position in sleep-apnoea medical device solutions
Telstra as the provider of superior wireless communications services and scalable fixed-line construction services
Caltex with its position as an integrated liquid fuel procurer, storage and distribution facilitator and marketer
ANZ Bank through its Asia Pacific banking services network
“Australian businesses are still fighting cyclical and structural factors such as a cautious consumer, lack of confidence in the Government’s policy decisions, the increasing effects of a strong Australian dollar on domestic business’ competitive position and growing uncertainty in the mining and related sectors,” Kessler says.
“Continuing attempts by the US, European and Japanese monetary authorities to dilute their respective currencies (to de-monetise their debt and stimulate their export sectors) will translate into “higher values” for hard assets and companies with well-diversified and robust cash flows.”