Invesco: Finding investment opportunities in global equities

Key takeaways

Each country’s economy is driven by a unique set of advantages and challenges, that can change and shift.

Today’s top-performing country may be on the bottom part of the global list tomorrow.

Our strategy is about finding attractively valued high quality individual stocks, regardless of region or sector. 

Most investors wouldn’t limit their portfolios to stocks from just one industry. But many have concentrated their portfolios in companies headquartered in their home country. Some may perceive this as a “safe” approach — but it can lead to an undiversified portfolio that’s overexposed to regional risks.

If your clients are prone to “home country bias” in their investment thinking, now may be a good time to talk to them about the opportunities that exist across the globe. Our approach seeks to find the most dynamic and exciting businesses in the world – irrespective of domicile. 

Why consider investing in global equities?

Each country’s economy is driven by a unique combination of advantages and challenges. Some regions are rich in natural resources, while others have a strong manufacturing base. Some are faced with political instability, while others may benefit from government stimulus plans. Different outlooks for inflation, different expectations for interest rates — it all adds up to a distinctive economic mosaic in each country.

Importantly, these drivers can change and shift. Today’s top-performing country may be on the bottom part of the global list tomorrow. This chart illustrates how different countries’ equity markets have taken turns at the top and bottom of the performance list over the past 10 years.

Top and bottom performers tend to change from year to year

Source: Bloomberg as of September 2024. Based on the constituents of the MSCI World Index: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the UK and the US.

How do we find global opportunities?

The Invesco Global Equities Team’s strategy for finding global investment opportunities isn’t about looking at a map — it’s about finding high quality individual stocks that are attractively valued, in whatever region or sector they may be found.

We’re bottom-up stock pickers who spend time analysing companies. We cast our net as wide as possible to ensure we’re not missing any obvious opportunities — but our bar for entry is high as, ultimately, we are looking to build a diversified portfolio of the best 40-50 stocks.

“We look to maintain a portfolio of superior businesses with strong balance sheets run by trusted management teams,” said Andy Hall, Global Equities Fund Manager.

Where do we see global opportunities today?

We try to avoid fads or themes, as often they only work in a particular type of investment environment. We are not betting on a specific economic scenario, favourable or otherwise. Neither are we betting on any particular outcome for the various elections that the world faces.

“We seek to deliver a diversified portfolio, in terms of sector, geography and share price correlation which has the opportunity to perform in different market conditions,” said Stephen Anness, Head of Global Equities.

In recent times, market returns have become excessively concentrated in a small number of companies such as the Magnificent 7 or AI winners. Valuations for some of these names now leave little room for disappointment. With investor expectations highly elevated and valuation multiples rich or priced above expected levels, we think the market might be underestimating the potential for a cyclical dip in revenues.

Our geographic exposures are determined by the stock opportunities we see across all markets. We don’t allocate from a top-down perspective. For example, in the Global Equity Income strategy we are overweight countries such as Belgium, Korea, Denmark and Canada. But that is a direct result of having exposure to just one company in each of those markets that we have identified as a compelling investment opportunity. 

The value of investments and any income will fluctuate (this may partly be the result of exchange-rate fluctuations) and investors may not get back the full amount invested.  

Data as at 8th September 2024.

This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

Views and opinions are based on current market conditions and are subject to change.