Advisor explains how trade war has shaken loose value and made the markets fun again
The market is fun again after some trade war-inspired volatility - and money managers are busy ferreting out opportunities.
While the recent correction was relatively bitesize, those holding their positions are starting to loosen purse-strings as value begins to creep in.
Grant White, portfolio manager at White Hewson Wealth Advisory Group at National Bank Financial, said his team has got more active again, looking east for “sexy" names like Tencent and Alibaba that have been “beaten up” by the trade dispute between US and China.
Chinese negotiators are due in Washington in the coming weeks as trade talks continue with President Trump, who set a 90-day deadline after meeting his counterpart Xi Jinping last month. Trump continues to send mixed signals about whether he intends to proceed with a dramatic hike in tariffs if a deal isn’t reached by March.
All the uncertainty is cat nip to investors expecting an eventual rebound – although some of that may already be priced in – from the affected Chinese companies. Alibaba – as well as Apple - shares dipped over concerns about the economic slowdown and the impact of tariffs but White said the fundamentals are strong and believes there are comparison between the two retail giants.
He said: “For a lot of reasons Warren Buffett likes Apple and started buying into Apple about a year-and-a-half ago, we like Alibaba for that reason. It is building this great ecosystem for consumers and they have these great moats around the services it is offering. They are already in a really good shape.
“We think that with the emigration to the middle class that’s going on in China, that’s just going to help fuel it even further and we’re going to see big multiples out of that over time.”
White believes that if Alibaba was a North American company, it would be close to a trillion dollar firm and once Trump and Jinping find some common ground, the Winnipeg-based advisor expects its value to rise.
“We’ve seen a pretty good boost already in the past couple of weeks,” he said. “When a deal is announced, I’m sure we’ll get a boost on that as well. We are not buying it on the short-term anyway, we think it’s a great company.”
Two less glamourous names that he is also positive about are TD Bank – a long-term hold – and Power Corp. He said: “[Power Corp] is not a sexy name but we absolutely love this company. At the moment, we can get a great company with 6% dividend yield, which we feel is very safe. The balance sheet looks good and the cash flow looks good, and we’re getting 6% a year just to hold that.”
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