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In this episode of The nestegg Podcast, host Maja checks in with our three experts to discuss this week’s biggest conversations about super, property and investment.

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Steve Waters, director of Right Property Group, talks about the current market and its growth prospects, hinting at a “revenge spend” period post-lockdown. Could property prices really inflate by a further 20 per cent?

Meanwhile, RMIT’s senior lecturer of finance, Dr Angel Zhong, talks about the earning season and dividends, delving into how companies decide distribution policy. Find out what is happening in the recent dividend announcements.

Last but not least, tax and super guru Timothy Munro talks us through the results of APRA’s inaugural super test and how engaged members should really be with their super. Timothy also touches on the super splitting law and what it means for relationship breakdowns.

Have a question for our experts? Get in touch at [email protected] and you might get featured in the next episode.

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Could property prices inflate by another 20%? What’s happening in recent divid...

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There is $17.5 billion in lost and unclaimed super across ...

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Investors warned on ‘unsustainably high’ equities

By Jack Derwin

September 20 2016
Share

Invest

Investors warned on ‘unsustainably high’ equities

By Jack Derwin
September 20 2016

More portfolios are increasing their exposure to equities given low bond yields and interest rates, in turn threatening the overvaluation of certain sectors.

investors warned unsustainably high equities

Investors warned on ‘unsustainably high’ equities

By Jack Derwin

September 20 2016
Share

More portfolios are increasing their exposure to equities given low bond yields and interest rates, in turn threatening the overvaluation of certain sectors.

Investors in equity markets could receive nominal or even zero returns over the next ten years unless they buck market trends and seek out their own opportunities, according to Wingate Asset Management chief investment officer Chad Padowitz.

“In our view, equity markets are currently the most expensive they’ve been in decades. This is being driven by companies that have dividend policies that offer a proxy for bonds, forcing global equities indices to levels that we think are unsustainably high,” Mr Padowitz said.

Accordingly, Mr Padowitz said there are opportunities for savvy investors looking for value in the market, rather than bond substitutes.

“As bond yields fall, a number of investors are flocking to stocks that they see as a proxy for bonds – that is, buying shares in companies that they believe deliver solid dividends – and they are doing so by selling out of other sectors. This creates good opportunities for those investors that don’t want to follow the herd,” he said.

Many of those equity investors are favouring long duration, low volatility assets including consumer staples, telecommunications, infrastructure and utilities sectors, creating opportunities elsewhere.

“These companies are subsequently trading at substantially higher valuations than would usually be the case. At the same time, there are other sectors that are very cheap, and these are the opportunities that we are currently focused on, looking at shorter durations, lower P/E multiples and higher free cash flow yield.”

Mr Padowitz said the US equity market may prove particularly advantageous for investors.

“We see most opportunity at the moment in US financials, which are trading at their cheapest valuations relative to the market in around 90 years, especially compared to book value,” he said.

“There are also good opportunities in certain segments of healthcare in the US. It’s usually an attractively priced sector in this kind of economic environments but this isn’t happening at the moment. The election cycle has thrown up some negative sentiment but we think that valuations will revert upwards.”

“Other sectors with good potential include capital equipment, energy and commodities.

“These sectors will benefit from rising interest rates, at the expense of those who benefit from falling rates.”

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