Look to consumer staples for Aussie equities
Financial planners should look to consumer staples, utilities, and non-bank financials this year when considering Australian equities, Martin Currie believes.
Speaking at a roundtable on Monday with Legg Mason, Martin Currie chief investment officer for Australia, Reece Birtles, said profit margins for Australia were low and return on equities for Australian companies was low.
"We're thinking consumer staples — there are a lot better opportunities now than in the last few years. So we're keen on names like Woolworths and Coca-Cola as they have both been under a lot of pressure and are very strong businesses," Birtles said.
"They have been reworking themselves to deal with those challenges and those sorts of stocks are underappreciated… this is very different from last year."
In utilities, Birtles said AGL was well positioned thanks to rising electricity prices as a result of coal fired stations being shut down in Victoria, leading to a change in the balance of supply and demand.
"We quite like non-bank financials — companies like Insurance Australia Group (IAG) — as they have a strong market position in personal lives, car and house insurance," he said.
"They've been through quite a weak period for pricing and looks like the rate cycle is beginning to improve and IAG's strong market position will be both resilient in down turn and will benefit from an improved rate cycle."
Birtles noted that the overall world market was blinded by the Trump election and Brexit as they detracted away from the commodity story that world nominal GDP growth would be strong over the next few years.
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