Mark Dampier: Will the markets recover? Of course
Saturday 28 February 2009
One can spend considerable time worrying about whether Europe is better than the US, or whether the UK is likely to outperform Japan. The trouble is that nobody really knows that, and those who think they know are usually wrong.
Identifying a quality fund-manager is a more realistic prospect. In fact, in many cases it's the fund manager I analyse rather than the fund itself. This week, I will look at the Cazenove European Fund under the stewardship of Chris Rice.
Rice has been running this fund for six years, and has 16 years of investment experience. In my opinion, he is easily one of the top European fund managers and should be seriously considered by those seeking an investment in the region.
Right now, perhaps you are thinking I am completely mad. Who would want to buy shares now? Isn't the world coming to an end? Well, when markets establish a clear trend people can never imagine that trend reversing. During a bull market, people seem to believe it will rise for ever, and when we're in a bear market, people reject the possibility that it will ever rise again. Experience tells us that both viewpoints are wrong.
Chris Rice's style is to run a diversified portfolio of shares in large and medium-sized companies. He looks carefully at the business cycle and tries to match his stock picks to where we are in the economic cycle. This is not an easy thing to do.
When I caught up with Rice last week, he said he saw three different cycles at the moment: economic; corporate; and valuation.
The valuation cycle brings some positive news. The start of 2009 saw the market valuation at around the third-lowest it has been in its history, with share prices at around 7.5 times earnings on average. From that point of view, the market appears cheap. However, we are not quite out of the woods yet. Rice believes that any recovery in the short term could be sharp, but we are not yet at the stage of a sustainable rally.
It seems we still have some way to go before we reach the bottom of the corporate earnings cycle. Perhaps we are halfway through the traditional peak-to-trough fall in earnings, but most of the fall so far has come from the financial sector. Other parts of the economy have not suffered to the same degree, so this is something to keep an eye on in future.
Turning to the economic cycle, governments are doing everything (and anything) they can to try to halt this economic decline. Their somewhat confused approach is causing bafflement among investors and is doing nothing to help confidence in the stock market.
Rice's view is to be overweight in large, well-capitalised defensive companies with little or no debt. He particularly does not want to invest in companies that were exposed to the huge boom in emerging markets, as their earnings of the past few years clearly cannot be repeated in the short term. So his portfolio is full of pharmaceuticals, telecoms and food stocks.
The key factor is what will happen in the financial sector; until it stabilises (whether via recovery or total nationalisation), it is hard to see how the markets can make any headway.
Given all this bad news, I did ask Rice whether it was worth even investing in Europe. While he admits that the next six months is extremely foggy, he remains a believer in the long-term potential of the stock market. I share that view, and in my opinion top-class managers such as Chris Rice are the people to see investors through.
As I have said before, it may be wise to drip money into the markets gradually and to remain committed to a time horizon of at least five years – 10 would be even better.
Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independent
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
New essay by JK Rowling went live on Pottermore site this morning
New UK station Russia Today gives a very bizarre view of Britain
Top Gear presenter is no stranger to foot-in-mouth controversy
This time last year, Enner Valencia was playing for his first professional club in Ecuador, in the process of building a career that began in the far northern reaches of the country, near the border with Colombia. In the last 10 months his life has changed beyond recognition, via Mexico, Brazil and now east London, a good story of football’s extraordinary power to propel a young man to great heights.
What has impressed me so much about Southampton is that at the heart of the club there is clearly a vision and a structure around which everyone, and everything, works. It dictates who they sign, how they play and how they develop young footballers.
10 tips for taking out a personal loan
Santander's new current account is not quite as easy as 1, 2, 3
Weekly Money: Round-up of the personal finance stories you may have missed 13-17 October
The 10 Best money-saving sites
Simon Read: Payday loans that are marketed at kids? Why not? They're already brainwashed into wanting products
- 1 Canadian actor punched in face after 'Islamophobia' experiment goes wrong in wake of Ottawa shooting
- 2 Topshop at centre of row over body image as 'shocking' skinny mannequin photo goes viral
- 3 Top Gear presenter Jeremy Clarkson criticised for beer tweet
- 4 Woman blinded as a child can see again after hitting her head on a coffee table
- 5 The bubble bursts for Sodastream
Pope Francis declares evolution and Big Bang theory are real and God is not 'a magician with a magic wand'
Huge surge in Ukip support after EU funding row, according to new poll
Ukip ‘exploiting grooming scandal’ to secure party’s first police chief
Nigel Farage: 'There’s nothing wrong with white people blacking up'
Maureen Lipman says 'she can't vote Labour while Ed Miliband is leader'
Muslims, immigration and teenage pregnancy: British people are ignorant about almost everything
iJobs Money & Business
£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...
£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...
Day In a Page
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000