COVER STORY 7
„ Higher-quality companies possess the ability to protect margins – even in an inflationary environment. Robert Næss portfolio manager at Nordea Asset Management
“In addition, by focusing on low-risk companies with solid underlying fundamentals – such as robust earnings and cash flow – we can be more confident of its P/E as a meaningful valuation metric for the company. In our view, it is very hard to trust a valua- tion of a company displaying volatile earnings,” Næss points out. Providing safety by minimising earnings risk Finally, when faced with the prospect of recession, Vorm and Næss are looking to identify less eco- nomically sensitive companies, which carry lower fundamental risk. “In times of recession, markets often fall for two reasons: earnings fall or fail to meet expectations, or earnings are de-rated by the market. Our stable equity approach minimises the risks of both of these scenarios,” Vorm says. The portfolio manager continues: “Stable earnings are a key part of our identification of stable equities. Our selection process targets high-quality businesses capable of maintaining stable earnings throughout the economic cycle, including during downturns.” Most of these are less sensitive to economic growth than the market average. The valuation overlay that the team employs gives an additional level of protection because the holdings have a lower risk of devaluing. “As a result, the lower volatility of earnings feeds through into less volatile share prices and less volatile performance. In fact, during periods when the earnings multiple for the market has fallen sharply, the earnings within our portfolio proved to be far more resilient,” 3 Vorm concludes.
Valuation as guiding lighthouse Additionally, in a world of still-elevated interest rates, Vorm and Næss think investors are best placed by prioritising attractively valued companies. “We have an actively managed and flexible approach when managing the Nordea 1 – Global Stable Equity Fund , but as a result of our valuation overlay, our portfolio tends to tilt towards the value style more than the growth style,” Næss states. “Holdings with lower valuations are less sensitive to high interest rates from a technical perspective because there is less weight attached to long- term expectations,” Næss explains. According to the expert, this is similar to a bond’s interest rate sensitivity, which will be lower in a shorter-dated bond. These lower-valued holdings also bring lower risk, as they are less volatile than their higher-rated peers.
Nordea 1 – Global Stable Equity Fund
Claus Vorm and Robert Næss
Managers
EUR
Base currency
LU0112467450 (BP-EUR) LU0097890064 (BI-EUR)
ISIN
02.01.2006 (BP-EUR, BI-EUR)
Launch date
3 The performance represented is historical; past performance is not a reliable indicator of future results and investors may not recover the full amount invested. The value of your investment can go up and down, and you could lose some or all of your invested money.
ISSUE 01.2023
Made with FlippingBook - Online Brochure Maker