With attractive valuations on global equity markets, London’s best-known stock-picker said the top four picks for future gains are consumer cyclicals, technology, value stocks and the financial sector.
Speaking in Taipei yesterday, Anthony Bolton, president of investments at Fidelity International, also said he saw potential for an uptrend in equity markets, although he said this upcoming recovery would be a slow one.
“I think [March was] the start of a [new] bull market,” he told a media briefing yesterday, urging investors to invest against the tides.
Not only equities, but also corporate bonds and Chinese stocks would outperform, he said.
In his two-decade career as a fund manager, Bolton said he had mostly underweighted the financial sector because banks were too difficult to analyze.
However, he said he had turned upbeat on the sector after governments around the world had made tremendous efforts to ensure the survival of the banks, and the valuation of banking shares had dropped to unprecedented lows.
Bolton said that he prefers commercial banks over investment banks — which could face stricter regulatory challenges — while advising investors to buy a basket of banking shares.
To choose value stocks across various sectors, Bolton said that he would look at cash flow or the price-to-book ratio of a company, although value stocks don’t usually do well in a bear market.
He said he placed an underweight position on defense stocks and commodities, which he said had led the last bull market, but likely wouldn’t lead the emerging bull market.
Bolton said that a bull market generally lasts two to three years, with shares likely to see a minimum jump of 50 percent, although he was not sure if that would apply to this bull market.
Although fears of a swine flu pandemic have panicked global stock markets, Bolton yesterday said that he had hopes that the flu outbreak would last only a few weeks since no deadly cases have been found outside of Mexico.
“On the evidence I’ve seen so far, I think it’s going to have a short-term effect, not a long-term effect,” he said.