Get Réal
We say Get Réal; it’s a global Community now. Our investment strategies for 2007 and beyond will emphasise global trends. Our key to investment success within these global trends is the combination of science and human imagination, applied to global solutions.
2006 Results
Our best calls came in Agriculture, High Yield, and Healthcare. Japan took a pause after a stellar 2005. We increased cash in anticipation of taking advantage of a downturn which came and went faster than anticipated. We viewed the October weakness in Income Trusts as unwarranted and added to positions, ending the year significantly ahead of the benchmark.
Reserve Currency Basket
A full third has come off the US$, so we do not see an impending crisis. The recent high oil price environment has shifted capital to countries more inclined to trade in other currencies. We foresee a reserve currency basket emerging.
Value
How much to pay for growth is a key determining factor for our investment performance. Brazil and Taiwan are cheap, Canada is a bit expensive.
Canada - Going Once, Going Twice
We are puzzled by Canadians' willingness to sell and surprised that big oil has not seen more activity. Canada remains a world energy kingpin, and we may move to E&P names. Canadian REITs are expensive thanks to buyouts so that we will move to International REITs for exposure.
Taiwan - Unraveling ‘Red' Tape
Taiwan is a carry-over from 2005 as the red tape between Taiwan and China unravels. Fundamentals in Taiwan currently mean you can finance loans with dividends from stocks, and big money is taking notice.
Brazil as a Microcosm of Global Trends
Brazil's global trading relationships are unique in the world and reflective of the benefits of achieving economic balance. We continue to believe that Brazil is likely the last disinflation play and we are sticking with sovereign bonds. The added kicker this year is falling costs of capital which should benefit interest rate sensitive sectors.
Global Trends, Global Companies
Live Long and Prosper, and Environment and Infrastructure are themes rooted in science. We have found companies earning significant returns on capital here, but you need to stack the odds in your favour - low valuation, strong R&D productivity, focused strategy, unrealised value. Get Réal on General Electric!
Investment Themes
Human imagination applied to science will drive investment returns under our themes of Feed the World, Fuel the World; Live Long and Prosper; and Environment and Infrastructure.