67 WALL STREET, New York - October 22, 2013 - The Wall Street Transcript has just published its current Investing Strategies Report offering expert industry commentary through in-depth interviews with Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Disciplined Growth Approach - Global Economy - Top-Down and Bottom-Up Investing - Bottom-Up Stock Selection - Value Oriented Strategy - Value Investing - Deep Value - Exposure to Emerging Markets
Companies include: Caterpillar Inc. (CAT), McDonald's Corp. (MCD), Johnson & Johnson (JNJ) and many others.
In the following excerpt from the Investing Strategies Report, an experienced portfolio manager discusses his investing methodology and top stock picks:
TWST: Are there any macro themes driving your investment decisions today regarding particular countries or asset classes or sectors?
Mr. Millay: Yes, there certainly are. There are three themes that we think are really important right now. The first general theme is the politicization of the global economy, meaning that economics and politics are deeply intertwined. We've seen that in the ongoing debates in the U.S. Congress about the debt ceiling and the bailouts. We've seen that in Europe with the ongoing struggles to preserve the Eurozone and the very highly politically charged nature of that. And we've also seen that in China, which is a centrally planned capitalist economy and, by definition, politicized.
And so everywhere we look in major markets, we see political factors playing a very important role in economic decision-making. In our view, this is a recipe for a higher level of volatility, and so it reinforces the importance of thinking about risk and the importance of being well-diversified, because there will be ongoing surprises, which are very difficult to foresee based purely on economic analysis.
The second theme that we think is important is that we may be entering a much more negative period for fixed income. Bonds had a tremendous bull market for the last 30 years because of falling interest rates, and interest rates cannot keep falling like they have in the past, and so this tailwind that bonds have enjoyed is more or less exhausted. Unfortunately, a lot of investors may not recognize that and may have more exposure to bonds than they should. Bonds are very important to play defense, to mitigate volatility and to protect against potential deflation, but we don't believe that their long-term return potential is very attractive at the moment.
And the third theme is the rise of the emerging market middle class. This is a very important phenomenon, and important not just for emerging market investments but for global investments. You look at where the marginal growth rates are going for a number of U.S. and international developed market firms, and it's happening in the emerging markets, whether it's Caterpillar (CAT), whether it's McDonald's (MCD), whether it's Johnson & Johnson (JNJ). We believe this transition that some emerging markets are going through to become more consumer-oriented societies is going to have profound implications for investors, with China being the most prominent example. So these are three themes that we believe all reinforce our approach to investing, which is to be globally diversified and also to be very thoughtful about the amount of risk that we're taking.
TWST: What criteria do you focus on when you're evaluating individual securities?
For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.