SUMMARY
Financial markets may see more moderate returns in 2022. We seek select sources of potential outperformance in equities.
Investment strategy
November 22, 2021
Seeking outperformance post-pandemic
November 22, 2021
- The performance of financial markets since late February 2020, the moment when pandemic fears paralyzed the world, has been nothing short of spectacular. We believe the outlook for 2022 will not be so dramatic.
- We believe potential long-term returns in equity markets may be enhanced by focusing on two corporate attributes.
- Investing in firms that consistently lead their industry and within industries that grow as a share of the overall economy; and
- Investing in firms that sustainably grow income distributions to shareholders.
- We also believe portfolios should be aligned toward sustainable return drivers. Accelerating global healthcare spending is one such long-term potential opportunity. Digitization is another. Think of digital as the “mainstream economy” with traditional industries adapting to it or fading against it.
- What oil and coal was to the industrial revolution, data is to the digital revolution. As with any vital resource, data needs to be protected against increasingly brazen attempts to compromise it.
- Data defense is a strong opportunity for investors. Global expenditure on cyber security is estimated to reach $269bn by 2026, up from $187bn in 20211. While valuations trade at a premium to the broader technology and software indices, we believe cyber security investments are justified by their stable revenue and earnings prospects.
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