After a turbulent year for global equity investors, Stonehage Fleming Investment Management has listed healthcare, the Chinese consumer market and de-globalisation and automation as “standout growth opportunities” for 2023.
Gerrit Smit, manager of the Stonehage Fleming Global Best Ideas Equity Fund, said that the volatile conditions of 2023 created opportunities to refine portfolios and said there continues to be attractive opportunities ahead, particularly for quality growth businesses which may enjoy more supportive conditions amid a bleaker economic outlook.
Smit’s first pick was healthcare, which faced a challenging 2022 as the lingering consequences of the pandemic impeded their performance. Tight US markets, hospital staff shortages and supply chain constraints prevented many companies from clearing their backlog. However, Smith said US medical technologies corporation Stryker and Edwards Lifesciences are two companies in a strong position to clear backlogs and utilise their “strong organic growth potential.”
Smit also points to the Chinese consumer market as an attractive opportunity, following the end of China’s zero-Covid stance and renewed buying appetite from consumers.
LVMH is considered a strong candidate, with its brands including Dior, Louis Vuitton and Tiffany’s resonating with Chinese consumers.
Smit comments: “A resumption of international travel by Chinese tourists should not only boost its travel retail business but also help support continued strong luxury demand in the US and Europe.”
Smit said Nike, which was previously renown for double-digit organic growth in the Chinese market pre-pandemic, is also likely to stage a recovery, driven by the end of Chinese lockdowns, continued innovation in manufacturing and direct-to-consumer marketing.
Finally, with the rise of geopolitical tensions and the recent dislocation of global supply chains, companies involved in de-globalisation and automation offer attractive opportunities for investors, says Smit.
“Corporates have turned their focus to reshoring their footprint in order to ensure smooth running of their operations. In many cases, this involves a move west and reversal of the cost advantages offered across Asia. The US Inflation Reduction Act has helped to catalyse this move, with tax breaks on the significant capital expenditure needed to install facilities onshore.
“Automating these new facilities will help balance the cost equation in a more expensive labour environment,” says Smit.
He cites Japanese sensors firm Keyence and semiconductor business ASML as two companies set to benefit from this theme. Semiconductor companies have a particularly important role to play in onshore migration, with the US CHIPS Act further incentivising the sector, he adds.
