Alec Cutler, portfolio manager of the Orbis Global Balanced Strategy, shares his insights on why he is heavily overweight in the UK, Japanese and emerging markets. He outlines his top stock picks.
At a media event in London yesterday, Alec Cutler of Orbis Investments
highlighted the case for investing in UK, Japanese and emerging
market firms, saying that they are still undervalued markets.
Cutler is heavily overweight in the UK and Japanese markets,
overweight in emerging markets and Europe and very underweight in
the US. “We find great UK firms that are very cheap as no one is
interested in them,” Cutler told the media briefing. “We use a
contrarian approach, buying good firms that are out of favour but
shouldn’t be,” he said.
“We have significant exposure to Japan and we are invested in
Japan’s Nintendo as well as Japanese-based Mitsubishi Heavy
Industries,” he continued.
Orbis isn”t alone in being positive on Japan and thinking
that as a result of corporate governance reforms and other
measures, the Asian country deserves more investor attention. See
more commentary here
on Japan. Cutler is also invested in China, South Korea and
Taiwan.
Cutler emphasised opportunities in the energy transition at the
event, notably in upgrading the infrastructure. He drew attention
to the role of cables, with 90 per cent of cable manufacturers
located in Europe. He invests in the cable manufacturer the
Prysmian Group as well as UK-based Drax, a renewable energy
company engaged in renewable power generation and the production
of biomass. Siemens Energy, which focuses on wind and natural gas
turbines, energy storage and electrification of the industry, has
also done well for him.
Despite the EU and Germany’s recent hike in defence
spending, making defence an urgent investment topic, Cutler
has trimmed down his defence stocks recently. “Defence stocks
have been a top performer for us,” he said. “We bought them when
they were cheap and when no one wanted them. But they have risen
a lot recently so we have trimmed them down. But European defence
stocks are still cheap and we haven’t sold out completely.”
Cutler highlighted the benefits of investing in artificial
intelligence-related industries and semiconductors. “We’re not
invested in the big, core industries like Nvidia, Google, Meta
and Amazon,” he continued. But he is invested in South
Korea-based Samsung Electronics, the largest global producer of
DRAM chips which has benefited from the price increase of DRAM
and NAND flash memory chips – driven by demand for generative AI.
He is also invested in Taiwan Semiconductor Manufacturing Company
(TSMC). “TSMC is one of the most important firms,” he added.
Cutler emphasised the benefits of investing in gold, which acts
as an inflation hedge, and which he started to invest in 2019.
“We’re also still underweight in fixed income,” he said.
Orbis Global Balanced Strategy
Cutler manages the Orbis Global Balanced Strategy which is a top
quartile performer across multiple time periods in its sector.
The fund seeks to balance investment returns and the risk of loss
using a diversified global portfolio. To do this, it primarily
invests in shares of publicly-listed companies and bonds issued
by companies and governments located anywhere in the world. It
can also indirectly invest in commodities. It targets
outperformance of the returns of its benchmark, 60 per cent MSCI
World Index with net dividends reinvested and 40 per cent JP
Morgan Global Government Bond Index (hedged into sterling).
Holdings include South Korea-based Samsung Electronics, TSMC,
Japan’s Mitsubishi Heavy Industries, UK-based Drax Group, cable
manufacturer the Prysmian Group, Siemens Energy focused on wind
and natural gas turbines, energy storage and electrification of
the industry and China’s sports equipment multinational Anta
Sports.
AloJapan.com