The changing economic landscape resulting from government climate policy, inflation and rising interest rates, and the subsiding of the coronavirus will create strong investment opportunities in some specific industrial sectors, a senior funds management executive has said.
With regard to carbon emission policies, Perpetual senior investment specialist James Holt said certain mining stocks should generate favourable portfolio returns.
“Green metals are very attractive for us, whether that be Oz Minerals or Illuka or Jervois. [Further], copper, aluminium and cobalt, all these things that go into electric vehicles [will provide strong opportunities],” Holt told delegates at the Australian Shareholders’ Association Investor Conference 2022 held in Melbourne last week.
“We think the decarbonisation story has tremendous legs behind it and we think those stocks, which we own a lot of, will be beneficiaries.”
With regard to rising interest rates and inflation, he suggested both banks and certain insurance companies are sectors investors should consider holding.
He pointed out the La Nina climate phenomenon currently affecting Australia will strengthen the case for allocations to insurances companies even more.
“In the rain, [insurance stocks] are depressed, but when the rain eventually ends, we’re going through a La Nina patch right now, their costs and claims will fall and their earnings will go through the roof,” he said.
According to Holt, companies offering experiences should also be attractive for investors as society begins to emerge from the COVID-19 lockdowns.
“We bought two or three lounge suites during COVID, five TVs and whatever it took to manage being stuck in our homes for the better part of two years,” he said.
“So people are hungry for experiences. Anyone try to get to the airport in the last two months? There are queues out the door. Everyone wants to get on a plane [and enjoy] an experience.
“[We like] event hospitality, those sort of hotels, and we like family-led businesses as well.”
At the other end of the spectrum, he identified concept stocks and companies that struggle to pass on inflationary pressure as ones to avoid.''