Bruce Whitfield
Investec Asset Management is continuing to invest its clients’ money in equities, despite the ongoing declines on world markets.
Investec started seeing value in the market at the end of last year. The group’s globalinvestment strategist Chris Carter said in January that he thought markets were offering reasonable value. Markets have declined since then, yet he is positive that the lower markets go, the more value investors will be able to extract. According to Investec valuation models, the United States market is 20% under fair value.
In March Carter said the Nasdaq was offering reasonable value at the 2?000 level. It’s fallen below 1?800 since then, but Carter is undaunted.
“I certainly think that tech shares and the market as a whole are somewhere in the 15% to 20% cheap range and the further they fall the more aggressively we’re going to buy.”
He argues that while March was a dreadful month for world markets, economic momentum in the US deteriorated at a faster pace in January and February.
On average analysts in the US have still been forecasting a rise in profits for American corporations in 2001.
There have been about eight occasions in the past 50 years where profits have fallen on a year-on-year basis in the US, and according to Carter, those falls have averaged about 15%.
Carter says Investec is buying, because their tools are indicating the market is trading comfortably below fair value and as it gets cheaper they are buying more carefully selected stocks.