We like a recent article written by Ricco Friedrich, manager of the SIM Value Fund, where Friedrich looks at how to get the most out of the prevailing market conditions.
For your convenience, we have summarized it below:
Investor choice in 2011 dries up
· Investors face the following situation:
- Cash offers negative real returns and bonds are unlikely to generate good returns over the next three years.
- Equities, particularly in emerging markets, have been a good option in an environment where there has been little choice.
- There still remains risks to the continued positive economic backdrop, such as rising inflation in china, a rise in interest rates, sovereign defaults in Europe and a potential decline in profit expectations.
- Particularly intriguing are current fund manager consensus views: Bullish on resources – specifically general mining, whilst being bearish on gold, food retail and platinum with a particularly negative outlook for banks.
- SIM’s investment strategy is to focus on factors that are within their control rather than trying to predict the future.
- Investors intent on avoiding loss must position themselves to prosper and survive under any circumstances.
- SIM is unlikely to take big directional bets, but rather aims to capitalise on mispricing opportunities arising from human behaviour.
- Sectors that are usually mispriced at the end of a recovery cycle are construction, resources and banks.
Click here to view the full article on the Investonline website