Growth has taken a beating as inflation fears have soared, but the tide may be turning, and we have six speakers at our next event to tell us why…by Pascal Dowling

 

After decades as the only show in town, growth investing has taken a steady beating since the pandemic began to retreat.

The chorus of doom for growth stocks – indeed for equities in general – grew louder in lockstep with fears over inflation. Inflation which, if we cast our minds back, was predicted initially as a result of the ‘sugar-in-the-petrol-tank’ effect of lockdown; a temporary blip as the world tried to switch a clogged system back on again.

How quaint this seems in hindsight. The calamitous impact on energy prices of Russia’s ‘special operation’ in Ukraine has been compounded by a knock-on effect on the cost of food production and distribution. Also, Ukraine’s defenestration has left a huge hole in the world’s wheat supply and a record-breaking drought in the northern hemisphere has led to less food in absolute terms. Witness the wholesale slaughter of beef cattle in America, for example, by ranchers who cannot feed them on grass that does not exist.

These factors, when combined, add up to what appears to be a significantly more powerful inflationary recipe than had been envisioned and the headlines which surround us today are brimming with the horrors that this could bring.

That many people will struggle to feed their families and stay warm this winter is not in doubt, but the primary aim of a headline is to shift more papers. Bad news fascinates us and fear has a momentum all of its own.

At Kepler Trust Intelligence, our primary objective is to produce research which aims to help investors create or, at least, preserve wealth. Looking at these matters purely from an investors’ point of view, there are signs that the inflationary dial may, in fact, begin to fall.

This has a significant impact on the theory that growth strategies have had their day and professional investors appear to be paying attention.

According to the most recent Global Fund Manager Survey from Bank of America, canvassing opinion from 250 investment managers with combined assets of $752bn, for the first time since August 2020 more fund managers now expect growth stocks to outperform value stocks in the next 12 months.

Almost all of the investors polled expect US inflation to decline over the next twelve months as fears of a recession grow. This recession may be an environment in which investors are more willing to pay up for companies that can deliver strong revenue growth, while it may also lead to the US Federal Reserve slashing interest rates, potentially boosting their valuations.

This dramatic shift in sentiment is evident in ETF flows. Data from State Street shows that US-listed value ETFs registered net outflows of $39m in July after positive inflows since August 2021, while US- listed growth-focussed ETFs saw inflows of $4.9bn after spending most of the first half 2022 in the doldrums.

Against that backdrop, we are excited to hear from six investment teams at our growth-focussed event on 19th, 20th and 21st September.

On Monday, we will hear from Zehrid Osmani, manager of Martin Currie Global Portfolio, a highly-concentrated, low-turnover, portfolio of global equities. Next, we will join Gervais Williams, the veteran small-caps manager behind Miton UK MicroCap. This is a unique trust focussed on the smallest companies in the UK-listed universe, with a strong focus on short supply chain ‘onshore’ businesses well suited to a post-covid world, trading currently on a discount of 7.9% despite delivering NAV returns of 48% over three years, ranking it second in its sector.

On Tuesday, we will join Stephen Paice at Baillie Gifford European Growth, which has traded under the Edinburgh giant’s banner since its relaunch in 2019. The investment trust aims to uncover companies with outstanding growth prospects in new technologies, new industries or in underappreciated sources of growth. Currently, the trust trades on a discount of 15.4%, despite delivering the second-best NAV return in its sector over three years. He will be followed by BlackRock’s Stefan Gries, who runs BlackRock Greater Europe alongside frontier markets’ specialist Sam Vecht. BlackRock Greater Europe aims to identify high-quality, high-growth equities in Europe with a unique twist, namely offering exposure to the entire continent including its least developed constituent countries.

Wednesday’s first speaker – Emily Whiting – will join us to talk about JPMorgan Asia Growth & Income which aims to offer exposure to the best long-term growth prospects in Asia with the additional benefit of a dividend paid from portfolio income, with the option to use capital where necessary. Trading on a discount of 10% and offering a yield of 4.7%, we view this as a great core holding for investors in the region. Our final speaker, Christopher Berrier, will join us from his office in Maryland to discuss the prospects for Brown Advisory US Smaller Companies, a portfolio of high-quality growth companies in the US small-cap market, trading on a discount of 12% at the time of writing despite delivering positive returns consistently over periods of 1 month, 6 months, 3 years and 5 years and only recording a loss of 2.1% over one year to date.

 

Presentations start at 12pm and 1pm on each day and are open to professional and private investors. Each presentation will last 45 minutes and will include live Q&A with the managers.

 

Please register here >

 

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Disclaimer

This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.





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