6 COVER STORY
Rock solid: stable equities can offer investors solid ground to stand on – a quality that is particularly important in a highly volatile and challenging environment.
often have strong brands or market-leading posi- tions, which enables them to increase prices,” Vorm explains. His colleague Næss adds: “With strong busi- ness models and good management teams, higher- quality companies possess the ability to protect mar- gins – even in an inflationary environment. Robust revenues and margins mean such companies are able to maintain steady profits regardless of inflation.” Until recently, there has never been an extended period of high inflation over the history of the Nordea 1 – Global Stable Equity Fund . However, the team tracked the earnings per share of branded consumer staples giants Coca-Cola, Procter & Gamble and Johnson & Johnson 2 during high inflationary periods seen during the 1970s and 1980s. These com- panies, which have regularly featured in the portfolio over recent years, consistently demonstrated strong pricing power.
act as stabilisers during periods of heightened volatil- ity,” Vorm says. “We do not specifically target low- beta or high-dividend stocks. However, the invest- ment process typically results in a portfolio which includes stocks with lower beta and higher dividend yield than the overall market.” Withstanding the turmoil of high inflation After more than a decade of historically low interest rates and unprecedented monetary support, the investment backdrop has changed markedly over the past year or so. In an environment of high inflation, el- evated interest rates, and the clouds of recession still hovering, equity investors will need to have solutions able to combat such scenarios. In terms of contending with high inflation, Vorm and Næss believe inves- tors should be gravitating towards higher-quality companies. “Our investment universe is made up of high-quality companies with steady earnings. These
2 Reference to companies or other investments mentioned should not be construed as a recommendation to the investor to buy or sell the same but is included for the purpose of illustration.
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