Transcription of Finance News Network with Altrinsic Global Advisors Fund Manager, Simon Blanchflower Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from global equities fund manager, Altrinsic Global Advisors is Simon Blanchflower. Simon welcome to FNN.
Simon Blanchflower: Thank you for having me here.
Lelde Smits: Global equity markets are currently appearing quite choppy. What do you believe is driving the change in sentiment?
Simon Blanchflower: Well firstly from Altrinsic’s perspective, we’re certainly seeing increasing volatility. We’re seeing increasing dispersion and correlation starting to breakdown. So for us, it’s a very interesting time and great for active managers generally. In terms of what’s been driving the volatility, it’s been a combination really of rising oil prices. They’re up about 50 per cent off the bottom. We’ve also seen a significant breakout in German bond yields, up to about 80 basis points at the peak. Whereas only a few days prior to that, they were trading almost as low as 10 basis points. So quite a big breakout and that’s really what’s driving volatility.
Lelde Smits: Do you think we will continue to see more pressure on equity markets?
Simon Blanchflower: We’re in an environment where stock markets are at all time highs, interest rates at all time lows. In fact, something like four trillion of developer bonds are in negative yield, which is an unsustainable situation. So I think as interest rates do start to rise, I mean we’re hoping that rises will be gradual, but every now and again; we may see spikes that we saw like in the last week. So I think with that situation of low interest rates/high valuations, you will see more volatility as interest rates rise.
Lelde Smits: How is Altrinsic positioned to capture this changing environment?
Simon Blanchflower: We’re bottom up stock investors. We’re trying to find ideas that trade at discount intrinsic value and importantly, we address agnostic and benchmark unaware. So we’re trying to find a handful of high conviction ideas, best ideas from around the world. And then currently we’re underweight US equities, have been for a while, overweight European equities and overweight Japanese equities.
Lelde Smits: Could you give us some examples of what you’re invested in?
Simon Blanchflower: In Japan for example, which is probably our biggest relative position, we have roughly a double weight in Japan. It’s a mixture of Japanese financials, which is probably the biggest position in the portfolio in terms of opportunity. And we’ve also got a mixture of more export-oriented companies in there as well. Companies like Mitsubishi Corp (TYO:8058), we also have Nintendo Company Limited (TYO:7974). And on the financial side, we’ve got a couple of the Japanese banks like Bank of Yokohama Limited (TYO:8332), Mitsubishi UFJ Financial Group Inc. (TYO:8306). And we’ve also got a couple of insurance companies as well in Japan.
In Europe, it’s more multinationals in Europe, particularly in the consumer and healthcare side of things. So we’ve got healthcare companies like Roche Holding Limited (VTX:ROG) and Novartis AG (VTX:NOVN). And on the consumer side, we’ve got stocks like Diageo (EPA:DGE), so quite differentiated global businesses. Importantly in Europe, we’re quite underweight European banks for example, we don’t own any. We’ve got Standard Chartered PLC (LON:STAN) in London, but it’s more of an emerging markets bank.
And in the US, we’re underweight in the US, but quite I guess, a broad footprint there with consumer stocks like Target Corporation (NYSE:TGT), Wal-Mart Stores Inc. (NYSE:WMT). And on the energy side, we’ve got stocks like Apache Corporation (NYSE:APA). We recently bought into EOG Resources Inc. (NYSE:EOG), one of the best fracking players in the US.
Lelde Smits: Finally Simon, could you explain how is Altrinsic strategy faring so far this year?
Simon Blanchflower: So far this year, we’re up just under 12 per cent this year, outperformed markets by about 2.5 per cent. We’ve seen a bit of a change in markets this year. The US hasn’t been quite so strong, dollar’s still been fairly strong overall, but the US market’s been a bit weaker. Certainly from our perspective, we’re seeing strong performers come through from Japan. Our holdings there, particularly in Japanese financials, have done very well this year.
I mentioned Nintendo earlier. Nintendo was up about 50 per cent this year; it just recently went into a strategic alliance with DeNA Company Limited (TYO:2432), a Japanese mobile gaming company. So they’re looking to take IP into the mobile world, which is very attractive to us and so it’s good to see that come through.
And in Europe, healthcare stocks have been doing well as well. They continue to invest in innovation, looking to treat serious diseases like oncology for example. They’ve been doing very well.
Lelde Smits: Simon Blanchflower thank you for the update from Altrinsic Global Advisors.
Simon Blanchflower: Thank you, it’s been great to be here.
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