Gold­manS­tarMan­agerSeesWildMar­kets,TameGains

With my sleep, but it also cre­ates op­por­tu­ni­ties for stock pick­ers, says Suneil Mahin­dru

The Economic Times - - Companies -

New York: Suneil Mahin­dru ex­pects a wild ride in the world’s stock mar­kets and not that much to show for it, at least com­pared with eas­ier times in the past.

The chief in­vest­ment of­fi­cer for in­ter­na­tional eq­ui­ties at Gold­man Sachs As­set Man­age­ment, who over­sees about $15 bil­lion, says bouts of volatil­ity will con­tinue as ner­vous in­vestors dump shares at even the slight­est hint of bad news. Yearly re­turns on stocks will prob­a­bly be in the mid-sin­gle dig­its as low in­fla­tion and high debt con­strain growth in the big­gest economies, he says. That’s about in line with the av­er­age over the past two decades, though down from the 12% av­er­age through­out the re­cov­ery from the 2008 cri­sis.

Shares have just clawed their way back to where they started 2016, af- ter con­cern about col­laps­ing oil prices and the po­tency of cen­tral bank stim­u­lus drove a global stock gauge to a 2 1/2-year low in Fe­bru­ary. For Mahin­dru, the world is still strug­gling af­ter the kind of re­ces­sion that gen­er­ally takes a decade or more to over­come. He’s not alone in see­ing muted re­turns, with US equity strate­gists pre­dict­ing just a 3.3% gain in Amer­i­can stocks for the rest of the year. “The mar­ket is very skit­tish,” Mahin­dru said in a phone in­ter­view from Lon­don this week. “Any­thing that can be in­ter­preted as neg­a­tive, the mar­ket is in­ter­pret­ing it neg­a­tively,” he said. “It doesn’t help me sleep but ac­tu­ally it gives me more op­por­tu­ni­ties.”

Mahin­dru runs Gold­man’s flag- ship Global Equity Part­ners Port­fo­lio, which holds 25 to 35 com­pa­nies with high and de­fen­si­ble re­turns, pre­dictable busi­ness mod­els and lower val­u­a­tions — a strat­egy that the com­pany says should per­form well even when the mar­ket turns bad.

The fund has re­turned an an­nual av­er­age of 5.6% over the past five years, against a 6.8% gain for its bench­mark,theMSCIWorldIn­dex­de­nom­i­nated in US dol­lars, ac­cord­ing to data on Gold­man’s web­site. While Mahin­drude­clined­ton­ame­com­pa­nies it buys, the two largest hold­ings areYum!Brands,ownerof theKFC, Pizza Hut and Taco Bell fast-food chains, and Al­pha­bet, the par­ent of Google, ac­cord­ing to the web­site.

Mahin­dru sees scope to ex­ploit a sell­off in Euro­pean shares by pick­ing global busi­nesses that hap­pen to be listed there. On China, he ex­pects more volatil­ity as the econ­omy shifts from manu-

‘Bouts of volatil­ity will con­tinue as ner­vous in­vestors dump shares at even the slight­est hint of bad news’

fac­tur­ing to ser­vices, where the govern­ment has much less con­trol. He fa­vors consumer busi­nesses as­so­ci­ated with a high stan­dard of liv­ing, any­thing from health­care to food qual­ity and even sports­wear. A mea­sure of Euro­pean stocks lost 6.2% in 2016, while the Shang­hai Com­pos­ite In­dex was down 13% through Wed­nes­day.

“When peo­ple say, ‘I don’t want to own Europe at all,’ that gives us an op­por­tu­nity,” Mahin­dru said. In China, “we tend to stay away from state-owned en­ter­prises and fo­cus much more on the pri­vate sec­tor, where we find good busi­nesses.”

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