Selectivity key to disruption opportunities

Investors must exercise a more selective approach to their investments amid the growing opportunities that are emerging in disruptive innovation and the continued uncertainty in global markets, according to Nikko Asset Management.

Presenting at the annual Nikko AM Foreword 2018 in Sydney last week, Nikko AM head of global equities Will Low said: “You need to know what you want to own within the markets.

“So it’s all about selectivity and there are a couple of things behind that.

“One is that the growth trajectory in many economies is going to be a lot more pedestrian so as a result the disruptive forces, which are clearly still at play, from a technology perspective there’s a massive divergence still between the winners and losers in many sectors and economies around the world.”

Low said being on the right side of where the winners and losers are, as a stock picker, is one of the key drivers of excess returns.

“The reality is those excess returns have got a reasonable probability of being a bigger proportion of your total returns,” he said.

“So again, being on the right side will make a difference.

“No matter what’s thrown at us, in regard to the pending changes and challenges we have, we need to make sure you have clarity around what you do want to own.”

He also said investors need to be open-minded about what will happen next in markets.

“The reason being I think we’ve reached the major inflection point in monetary policy and undoubtedly all the changes taking place in the political world, particularly with politicians involved, you really don’t know what the answer is going to be,” he noted.

“So your radar has to be up and one should not be expecting a conducive environment for valuation games as being a significant portion of your overall returns.

“To be honest, that seems far less likely with some of these uncertainties developing.”

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