The currency market response to the UK government’s planned tax cuts was brutal.With blood in the streets, Bell is putting all his eggs in the quality basket; a factor that’s gained prominence as investors seek the perceived safety of lower-growth companies with steady returns, squeaky-clean balance sheets and limited degrees of earnings variability.
“We’ve highlighted about thirty names that we believe have got return on capital north of 15 per cent. They’ve grown revenue by at least 5 per cent per annum over the past five years, earnings by at least 10 per cent, and they’ve got a free cash flow yield north of 3 per cent. “Earnings expectations will come back but earnings themselves aren’t necessarily falling off a cliff, but the market is pricing that in.”
Without exposure to energy, the strongest performing sector last year, how well has the strategy performed? Bell Global Equities had a strong 2021, clocking up a top ranking performance of 31.7 per cent, according to Morningstar. Overweight positions in healthcare and consumer cyclicals paid off, while big tech names buoyed performance.This year has been tougher, returning negative 18.3 per cent and underperforming Morningstar’s global equity ex-Australia index.