The world’ s biggest businesses could be hiding the biggest risks.
That’ s because companies like Amazon. com Inc. and Alibaba Group Holding Limited are overvalued, based on Robert Naess, who manages regarding $42 billion in stocks on Nordea Bank AB , Scandinavia’ s largest bank.
“ I’ m a bit worried about the particular valuation of these very popular companies, ” Naess, portfolio manager, said within an interview in Oslo on Fri. “ The big stocks have become more costly. There’ s danger of a bubble in them. ”
Naess and his partner, Claus Figuur, quantitatively analyze thousands of companies, purchasing those with the most stable earnings plus avoiding expensive stocks, a strategy that has delivered a 10 percent return for your Global Stable Equity Fund this year. It has returned twelve percent on average in the past five yrs, beating 75 percent of its colleagues.
They choose “ boring” stocks, unlike a global behemoth technology companies that have brought the global stock rally. Tech stocks and shares sold off at the end of November, using the single worst day on report for the so-called FANG stocks. Among those stocks, Amazon, which has risen fifty five percent this year, has a price-to-earnings percentage of 275 for 2017, compared to 18. 2 on average for MSCI World Index.
“ Long-term, 5-10 years, stocks which are expensively priced, such as Amazon, Tencent and Alibaba, will give a low come back, ” Naess, who also runs from Facebook, Inc., said. “ I’ m pretty certain that in the next ten years the return on those is going to be lower than the market. ”
The fund holds Apple Incorporation. and Alphabet Incorporation. , which are “ reasonably priced”. It has also bought a stake within Merck & Co., Inc. plus increased in Amgen Inc. , CVS Health Corporation and Walgreens Boots Alliance, Inc.
Naess sees about 12 % upside for the global developed stock exchange in the next 12 months provided companies still deliver expected earnings growth.
“ 2018 looks OK, ” he mentioned. “ Normally, I think the earnings quotes are too high. But I believe cash flow estimate could be too low next year provided earnings are so good this year. ”