Equity Investing in 2024

How to Position in a World of Uncertainty

2024年1月2日
3 min watch
Transcript

Chris Hogbin:

So it was a very strong year for broad equity benchmarks around the world, but it perhaps didn't feel like a great year for many investors. There's economic uncertainty for sure. There's geopolitical uncertainty in various areas around the world. There's regulatory uncertainty. So how should we really position against such an uncertain world?

Nelson Yu:

We focus on individual companies and look for high-quality companies that have clean balance sheets. Look for companies that derive a lot of consistent profitability and companies that have strong moats where they can maintain their profitability going forward. That really will help you drive long-term returns.

I think the second ingredient to that though is to make sure that we're not putting all of our eggs into one basket. A lot of different types of strategies will work very differently, depending on what kind of environment you're in. So it's very important to make sure that your portfolio is well diversified to be able to withstand all those turns in the market.

Chris Hogbin:

Where do you see the greatest opportunities for investors rolling into 2024, and how would you advise people to position to take advantage of those?

Nelson Yu:

So if we look through value, defensive or secular growth, there are a lot of opportunities in there.

One example is within value. There's a lot of reinvestment going on across manufacturing across the world, and we see some companies with great profitability going forward.

If you look at companies that are defensive, this high-rate environment is really good for insurance companies.

Finally, looking at secular growth. Here, you're looking at maybe disruptive companies, like some of these new energy drink companies that can take market share away from a lot of the incumbents.

Chris Hogbin:

With the environment that you anticipate, should investors be actively invested or passively invested?

Nelson Yu:

If you look at the Russell 1000 Growth, 45% of the market is in just seven companies. Those same seven companies make over 25% of the S&P. So by taking the passive approach, you're actually gaining a very concentrated portfolio.

Now that could be great, because those seven companies are good companies, but there's so many opportunities that you're missing and you're also risking that concentration of the marketplace. So we think that active is really a better place to be for long-term, well-balanced returns on a risk-adjusted basis.

Chris Hogbin:

So obviously, we're in a different type of environment today, with higher interest rates than we've seen in the last decade, higher inflation than we've seen in the last decade. So what does that mean in terms of how investors should position and where the opportunities really are?

Nelson Yu:

So if you just think on a free-cash-flow yield basis, for example, if you look at equities right now, very similar to bonds, but equities has that growth potential. Within just a couple of years, we expect the free-cash-flow yield of equities to be much higher than what we're seeing in the bond market.

We've seen these types of markets before. After a period of very concentrated types of markets, over time, the trends change and that's really where the opportunities that we've discovered can do phenomenally well. We saw that post the dot-com bust. We saw that after the pandemic, and we can see ourselves benefiting from that again as active investors.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to revision over time.

Investment involves risk. The information contained here reflects the views of AllianceBernstein L.P. or its affiliates and sources it believes are reliable as of the date of this publication. AllianceBernstein L.P. makes no representations or warranties concerning the accuracy of any data. There is no guarantee that any projection, forecast or opinion in this material will be realized. Past performance does not guarantee future results. The views expressed here may change at any time after the date of this publication. This article is for informational purposes only and does not constitute investment advice. AllianceBernstein L.P. does not provide tax, legal or accounting advice. It does not take an investor's personal investment objectives or financial situation into account; investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer of solicitation for the purchase or sale of, any financial instrument, product or service sponsored by AllianceBernstein or its affiliates. This presentation is issued by AllianceBernstein Hong Kong Limited (聯博香港有限公司) and has not been reviewed by the Securities and Futures Commission.


About the Authors