- Equity Portfolio Manager
Asset classes
Hong Kong (香港), Individual
Change
In this edition of “Rapid fire questions,” Equity Portfolio Manager Steven Angeli answers four key questions on quality growth equities.
Q: What is your take on today’s high level of market concentration?
While a concentrated market can be challenging at times, it also creates real opportunity for investors like us who search globally for less discovered quality growth companies. As a bottom-up stock picker, we stay focused on what looks most attractive in terms of the four factors of growth, valuation, capital return, and upside.
The Mag 7 as a group has become less attractive recently as valuations have risen and free cash flow has been pressured by capital expenditures. Ultimately, history has shown that extreme concentration in a benchmark or sector can create outperformance elsewhere as correlations fall and dispersion rises across sectors.
Q: As an active investor, how has that concentration shaped your opportunity set?
There have been significant pockets of performance and concentration in the market. Outside of AI, many stocks across other sectors have been overlooked. As a result, we increasingly are seeing compelling opportunities driven by wide gaps between valuation and growth across sectors. Pharmaceutical companies, financial services providers, and health care services are among the areas where we see opportunity and that should become clearer as the market’s focus on AI ultimately fades. Even within AI, we see dramatic dispersion in valuations. Global quality growth gives investors access to a diversified range of opportunities.
Q: What are your highest-conviction ideas right now?
Of course, there is AI. We believe AI is certainly in a supercycle. We see a growing number of opportunities: semiconductor companies in Asia alongside our existing holdings in the US that are focused on optical technologies, CPUs, and hardware. We expect AI-related capital expenditures to grow from approximately 450 billion last year to 750 billion this year and likely to exceed 1 – 2+ trillion in the years ahead.
Outside of AI, we see opportunities in several areas where supply is constrained but demand remains solid, including metals and mining, real estate, and transportation.
We also see selective opportunities in “forgotten” high-quality growth companies in financial services and insurance, especially in Asia and Europe. We also expect many of these companies to benefit from using AI to improve their execution and competitive position.
Q: What are the key risks to watch over the next 6 – 12 months?
A key risk is the duration of the AI supercycle. As of today — and subject to valuations — based on the fundamentals we see from our bottom-up research, this supercycle could potentially persist for two more years. Supply is still constrained and demand remains strong, but ultimately this cycle will end. That is why we are focused on building a diversified portfolio of quality growth companies that can hold up even as the cycle slows.
Inflation is another risk I would highlight. In the short term, the war in Iran has pushed energy prices higher, creating inflationary pressure across multiple sectors, not just energy. Over the long term, deglobalization could also put upward pressure on final goods prices. Ultimately, central banks may need to raise rates to offset those inflationary forces.
We are operating in a more uncertain geopolitical environment, so policy uncertainty can always create risk. That said, these risks have often led to short-term corrections, while the broader global growth cycle has endured. Looking back, the war in Ukraine is a good example of how economies and companies have adapted and continue to drive higher returns for shareholders.
The views expressed are those of the speaker at the time of filming. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed.
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