The investment opportunities are constantly changing as economic reopenings roll on. Active equity investor James Bristow is spanning the globe and finding no shortage of investment excitement.
There are many reasons to invest beyond U.S. borders. Some of the most commonly cited:
- Home country bias means U.S. portfolios are underallocated to international opportunities.
- Global stocks have cheaper valuations than U.S. counterparts.
- Economic and company growth prospects can be greater outside the U.S.
The third point is what Fundamental Equities portfolio manager and active stock picker James Bristow encapsulates in one word particularly well suited to post-pandemic life: excitement. The type of excitement he refers to is the innovation and dynamism that is driving strong company earnings across sectors and around the world ― a great share of which is outside the U.S.
Mr. Bristow has been at the helm of the the BlackRock International Fund for 14 years, successfully weathering multiple business cycles, including the 2008 Global Financial Crisis and the ongoing COVID-19 pandemic.
As vaccines pave the way to broader economic reopening and recovery, Mr. Bristow is eyeing up what he sees as significant investment potential. While markets globally have come a long way and many recovery stories are already built into pricing, Mr. Bristow and team are looking for companies that have not yet priced in their full potential or those poised to emerge from the COVID crisis even stronger than they were before it.
Where does optimum excitement reside? Mr. Bristow takes a company-by-company approach to arrive as his high-conviction ideas, but he offers three themes for consideration in the current environment:
Building for the future
Fiscal and monetary stimulus during the crisis has been unprecedented. Low interest rates make borrowing for infrastructure improvements more attractive for businesses and individuals alike. Governments are also more committed than ever to environmentally friendly improvements, which should compel further demand for raw materials and building essentials. This should benefit stocks across the industrials complex. Opportunity also exists in the electric vehicle (EV) supply chain, including some traditional original equipment manufacturers as well as EV battery suppliers.
Digital first
Work from home and contactless activities of all stripes have reset expectations for the future of computing and digitization. Many investors believe the U.S. and China are the only ports for innovative technology, yet many overlooked opportunities reside in Europe, Japan and emerging markets across Asia and Europe.
Mr. Bristow and team look for attractive growth trends that are mature in the U.S. but in early stages in more nascent economies. Several of these fall into the ecommerce category, where penetration rates are low but rising.
Social restart
Nowhere is excitement more palpable after months of lockdown than in areas related to socialization and celebration, a trend already reflected in valuations for many travel and leisure companies. We believe shares in Europe’s airlines can take off once local restrictions are lifted, consistent with patterns seen in the U.S.
Fundamental Equities’ data scientists have noted an uptick in visits to airline websites, as shown in the chart below ― providing some early evidence of the prospects in Europe. One underappreciated opportunity: digital payment providers, which could benefit from a pick-up in travel and cross-border transactions.
Readying for take-off?
Change in online airline search, 2020-21 vs. two years prior
Importantly, today’s winning themes may be outdated tomorrow. This is particularly true in this fast-moving business cycle. Active stock pickers like Mr. Bristow stand ready to capitalize as the backdrop ― and the opportunity set ― changes.
Going bottom-up for upside
Flows into global equities have been robust this year, signaling the market is aggressively anticipating the recovery. As the cycle evolves, Mr. Bristow sees individual stock selection gaining in importance. Divergences will increase, and the decisions will not be as broad as which industry or which country, but which individual companies within each. This, Mr. Bristow says, epitomizes “excitement” for bottom-up stock pickers, as this is the type of environment in which deep research and high conviction can set an active portfolio apart from the broad global indexes.
Investing involves risk, including possible loss of principal. Stock values fluctuate in price so the value of your investment can go down depending on market conditions. International investing involves additional risks, including risks related but not limited to currency fluctuations, illiquidity and volatility. These risks are magnified for investments in emerging markets.
This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of June 2021 and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader. Past performance is no guarantee of future results.
You should consider the investment objectives, risks, charges and expenses of any BlackRock mutual fund carefully before investing. The prospectus and, if available, the summary prospectus contain this and other information about the fund and are available, along with information on other BlackRock funds, by calling 800-882-0052 or from your financial professional. The prospectus should be read carefully before investing.
Prepared by BlackRock Investments, LLC, member FINRA.
©2021 BlackRock, Inc. All rights reserved. BLACKROCK is a registered trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.
USRRMH0621U/S-1677604
© BlackRock
Read more commentaries by BlackRock
