A flood of assets into higher yielding equities and a slowdown in economic growth in China are two of the major issues shaking the confidence of global investors. Portfolio manager Steve Watson explains how a contrarian approach to the market can help uncover opportunities even when investors are most doubtful.
As a manager in several dividend-focused funds, particularly International Growth and Income Fund, where are you currently finding value among dividend-paying companies?
Insurance companies have done very well over the past few months. The insurance companies were hurt by being part of the financials sector during the global financial crisis, even though their business models were much more robust than their share prices indicated. Today, insurance companies are a great source of dividends. While they did cut their dividends during the financial crisis, the extent of those cuts was far less severe than those of the banks. Within the industry, you get a nice combination of high dividend yield and capital appreciation and the market appears to be coming around to these companies. So I think insurance company dividends are attractive.
Another area of focus in International Growth and Income Fund is pharmaceutical companies. Many investors around the world have expressed uncertainty about the quality of product pipelines and patent cliffs and have driven down the share prices of these companies.
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