With the US capital spending cycle starting to ramp up, there are "pretty darn attractive" growth ideas for 2018, according to an industry insider
Growth beats value for investors heading into 2018, according to an industry insider.
With synchronised global growth a hot topic, Ted Theodore, Portfolio Manager of the TrimTabs US and International Free-Cash-Flow ETFs (TTAC, TTAI), believes the economic environment will reward the long game over short duration value.
Theodore says synchronised global growth is down to three main factors: Europe’s encouraging response to the Brexit uncertainty; a lack of a real estate collapse in China and the country’s buildup of its tertiary industries; and, most importantly, the revival of the Japanese economy.
He said: “It’s the first synchronist expansion in a long time and it is accelerating. It’s in the early stages so from just the economic building blocks, it looks pretty good.”
He added: “A lot of folks think that because value has underperformed in the past 18 months, that’s due to come back. I don’t think it’s that easy that just because those factors have underperformed, it will move to the head of the line.”
While returns are upfront, at a high dividend, value is short in duration, Theodore said. For growth, however, “the goodies are towards the end of the line”.
“If you think about it in an environment where global growth is accelerating and the US capital spending cycle has started to really ramp up, [the latter] really is one of the best signs that business managers are extending their time horizon and are looking out farther, meaning the long duration should benefit.
“It’s not clear to me that just because value has underperformed it’s going to outperform. Some of the factors that are behind growth seem to be getting stronger. So I think it’s a case-by-case situation, but we think there are some growth ideas that are pretty darn attractive.”
In terms of the synchronised global growth buzz, Theodore says Japan’s emergence from 25 years of depression has slipped under many people’s radar.
“A long time ago Japan used to be big news,” he said. “It was the second largest economy in the world after the US and after 1989 it kind of crashed and burned.
“They have gone through 25 years of consolidation and depression or deflation, and with [Prime Minister Shinzō] Abe, they have turned it around and we’re seeing huge numbers there. Tourist entries into Japan are up 25% year over year, and there are all kinds of reports about profit growth and wage growth.
“It’s enormous news. They have the second largest economy now back on its feet and growing. That all happens outside the US and certainly we get the benefit. We grow when the rest of the world grows.”
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With synchronised global growth a hot topic, Ted Theodore, Portfolio Manager of the TrimTabs US and International Free-Cash-Flow ETFs (TTAC, TTAI), believes the economic environment will reward the long game over short duration value.
Theodore says synchronised global growth is down to three main factors: Europe’s encouraging response to the Brexit uncertainty; a lack of a real estate collapse in China and the country’s buildup of its tertiary industries; and, most importantly, the revival of the Japanese economy.
He said: “It’s the first synchronist expansion in a long time and it is accelerating. It’s in the early stages so from just the economic building blocks, it looks pretty good.”
He added: “A lot of folks think that because value has underperformed in the past 18 months, that’s due to come back. I don’t think it’s that easy that just because those factors have underperformed, it will move to the head of the line.”
While returns are upfront, at a high dividend, value is short in duration, Theodore said. For growth, however, “the goodies are towards the end of the line”.
“If you think about it in an environment where global growth is accelerating and the US capital spending cycle has started to really ramp up, [the latter] really is one of the best signs that business managers are extending their time horizon and are looking out farther, meaning the long duration should benefit.
“It’s not clear to me that just because value has underperformed it’s going to outperform. Some of the factors that are behind growth seem to be getting stronger. So I think it’s a case-by-case situation, but we think there are some growth ideas that are pretty darn attractive.”
In terms of the synchronised global growth buzz, Theodore says Japan’s emergence from 25 years of depression has slipped under many people’s radar.
“A long time ago Japan used to be big news,” he said. “It was the second largest economy in the world after the US and after 1989 it kind of crashed and burned.
“They have gone through 25 years of consolidation and depression or deflation, and with [Prime Minister Shinzō] Abe, they have turned it around and we’re seeing huge numbers there. Tourist entries into Japan are up 25% year over year, and there are all kinds of reports about profit growth and wage growth.
“It’s enormous news. They have the second largest economy now back on its feet and growing. That all happens outside the US and certainly we get the benefit. We grow when the rest of the world grows.”
Related stories:
Here’s the best strategy for the current markets
Is China causing weakness in commodities?
