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US stocks continued to hit fresh highs last year but where do we go from here? While there are plenty of potential pitfalls on the road ahead, asset allocators are still finding various routes to generating alpha from US equities.
Discover where leading fund managers are investing
Opportunities in US equities in 2022
US stocks continued to hit fresh highs last year but where do we go from here? While there are plenty of potential pitfalls on the road ahead, asset allocators are still finding ways of generating alpha from US equities.
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The brightest prospects in US equities
It may have had an incredible run, but the US stock market still brims with opportunity for fund managers and asset allocators. At our first virtual event of the year, they revealed the sectors with the brightest prospects, the strategies that can be harnessed to add alpha and the trends shaping the market in 2022 and beyond.
Click here to view the full replay of the panel
CONTENT BY
We explore our extensive buy list data to reveal the favourite ESG funds among selectors
CIO Tony DeSpirito on stock-picking strategies and his expectations for 2022
This material is provided for educational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of January 2022 and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. The material was prepared without regard to specific objectives, financial situation or needs of any investor. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of yields or returns, and proposed or expected portfolio composition. Moreover, where certain historical performance information of other investment vehicles or composite accounts managed by BlackRock, Inc. and/or its subsidiaries (together, “BlackRock”) has been included in this material, such performance information is presented by way of example only. No representation is made that the performance presented will be achieved, or that every assumption made in achieving, calculating or presenting either the forward-looking information or the historical performance information herein has been considered or stated in preparing this material. Any changes to assumptions that may have been made in preparing this material could have a material impact on the investment returns that are presented herein by way of example. Investing involves risk. Equities may decline in value due to both real and perceived general market, economic and industry conditions. Diversification does not ensure profits or protect against loss. Investment in a specific sector can entail greater volatility given the narrower focus of the investment universe and concentration in sector-specific risks. ©2022 BlackRock, Inc. All Rights Reserved. BLACKROCK is a trademark of BlackRock, Inc. All other trademarks are those of their respective owners. 1988601
2022 may look more “ordinary” for U.S. stocks versus an extraordinary 2021. Yet we remain constructive on equities and see particular opportunity for fundamental stock pickers. SHIFTING WINDS As we assess the pros and cons in the broad stock market picture, we note some moderation in both the tailwinds that have given stocks a notable boost in 2021 and the headwinds that have served as offsetting variables. This sets the stage for a more balanced backdrop as 2022 begins. Tailwinds Policy support The swift, significant and globally coordinated fiscal and monetary policy stimulus delivered early in the COVID-19 crisis is being pared back. In the U.S., the Fed has started to taper its monthly asset purchases, with interest rate hikes to follow. Importantly, rates will be rising from a historically low base and are likely to remain negative after inflation ― still a supportive backdrop for stocks. Pent-up demand Consumers built up savings during lockdowns, and reopenings spurred a robust activity restart and vigorous spending cycle. We are past the initial swell, but it’s not over yet. We expect activity to settle into a trend over the course of 2022. Sidelined cash Businesses and individuals held cash aside amid the height of the pandemic uncertainty. Renewed confidence in 2021 led companies to deploy excess cash in dividends and share buybacks. We see even better prospects in 2022. Meanwhile, household income statements and balance sheets are also in great shape. Excess cash found its way into equity markets in 2021. We see room for more, even if the bulk has already been realized. Headwinds Inflation So far companies have been able to pass on rising costs, but we’re watching inflation’s potential to squeeze profit margins, particularly if consumers grow less willing to pay up for goods and services. While inflation is a concern and source of volatility, it also makes stocks the most compelling choice among the major asset classes. Our review of data back to the 1920s finds that equities perform well as long as inflation isn’t out of control (over 10%). In above-average inflation environments (5%-10%), value stocks have performed particularly well. Should inflation and nominal rates rise to the point where real (after-inflation) rates are no longer negative, that poses the greatest relative threat to equity risk/reward. Individual companies will manage through differently, highlighting the importance of a stock-by-stock approach. Valuations U.S. stocks appear expensive based on price-to-earnings (PE) ratios. This gives some pause. Yet more important for investors building a diversified portfolio is that U.S. stock pricing remains very compelling versus bonds. This is reflected in the equity risk premium (ERP), which values stocks based on the prevailing 10-year Treasury rate. Currently, our models suggest the 10-year Treasury yield (at 1.5% on Dec. 31) would have to approach 3% to compete with equity risk/reward. COVID-19 The virus is likely to remain unpredictable, requiring attention and respect for its potential to upend businesses and markets. With vaccine boosters now widely available, we see therapeutics as the next medical innovation to see the world into a post-pandemic “normal.” In a recent poll of BlackRock investors, roughly half felt that market reactions to rolling waves of COVID-19 would diminish over time as investors grow accustomed to the ebbs and flows of a more endemic virus.
Tony DeSpirito
Chief Investment Officer, U.S. Fundamental Equities at BlackRock
45%
39%
21%
15%
11%
Source: BlackRock Fundamental Equities, November 2021. The analysis is conducted for the five largest U.S. banks/capital markets companies by market capitalization and seeks to estimate the percentage change in earnings per share (EPS) assuming a +100-basis-point parallel shift across the yield curve.
Unloved: Energy Many may have shunned traditional energy on fears of its demise in a more ESG-centric world, yet there is still significant need as the world transitions to cleaner solutions. Those needs were magnified as the world reopened in the past year. We would focus on areas where there is opportunity for growth, such as exploration and production companies, rather than places where growth is limited, such as service providers. Misread: Portions of tech We expect companies will continue to spend on tech given the need to support both home and office systems in a hybrid work environment. The rollout of 5G is also creating opportunity: Telecom companies will need to spend on upgrades and create new use-cases for stimulating demand for 5G-powered technologies. Another interesting theme: tech as a labor-arbitrage device. As labor costs rise, we believe companies will increasingly look to technology solutions to create efficiencies. Mispriced: Healthcare Impressive ingenuity and innovation are powering the healthcare sector, yet valuations are well below the broad market. We see an understated opportunity in the medical devices industry, where earnings have been temporarily hampered as elective procedures were delayed by COVID closures and labor shortages. We see ground to be made up as these come back online.
GROUNDED IN FUNDAMENTALS Volatility could feature more prominently in 2022 as conditions move from unprecedented to something more “normalized.” Market gyrations can test investors’ will, a topic we tackle in Staying calm, even if markets aren’t. Volatility also can create opportunity, particularly for active stock pickers. Shifting winds mean the rising tide that lifted all boats in 2021 is poised to recede ― while company fundamentals surface as a key driver of returns. Against this backdrop, we believe selectivity across sectors and individual stocks can make an important difference in portfolio outcomes.
For Mr. DeSpirito’s full first-quarter outlook, see Taking stock.
Watch BlackRock’s James Bristow speak with author and behavioral finance authority Morgan Housel on “Behaving your way to investment success.”
FROM INSIGHT TO ACTION Absent the propellants that shot the key market averages forward in 2021, it will be important to focus on fundamental research to separate potential winners and losers. This may entail questioning some common instincts and looking in less obvious places for opportunities. Underappreciated: Financials Financials have suffered a bad rap since the global financial crisis (GFC), yet we see ample opportunity. Case in point: banks, one of few areas that benefit from rising rates and inflation. We calculated the potential impact of a 100-basis-point lift in interest rates across the curve on the earnings of the five largest U.S. banks and found earnings growth potential as high as 45% (see chart below). We find many banks are in their best fiscal shape since the GFC while valuations remain attractive. Where higher rates help Earnings sensitivity to a 1% shift in rates
Money matters: When intellect and emotion collide
Fund buyers:
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For 2022, Rhame & Gorrell’s temperature reading on US equities has cooled from ‘very hot’ in 2021 to a ‘still warm’ 75. ‘This new year comes off the heels of a historically strong year that marked the eighth-best three-year run in the history of the S&P 500,’ said David Hunter, chief investment officer of the firm based in The Woodlands, Texas. ‘In an environment where economic growth should continue to be above trend and where monetary policy, while tightening, continues to be accommodative, there’s good reason to be optimistic about the US market.’ He recognizes that the forces at play for US equities are not unanimously positive. With the prospect of persistently high inflation, rising interest rates and struggling bond markets, can large-cap growth stocks continue to warrant their current valuations given a higher discount rate and tougher year-on-year growth comparisons? ‘There are still attractive investment opportunities to be found,’ said Hunter. ‘In an expansionary economic backdrop with rising inflation, we like cyclical, value-type companies that are more levered to rising economic activity.’ He sees financials and energy continuing to outperform the broader market this year. Among growth stocks, he likes established, profitable companies that are not entirely priced off sales growth and generate sustainable free cashflow. He also sees potential among small caps. In a typical balanced portfolio, Rhame & Gorrell has maintained US equity exposure at around 50% but has been increasing weightings to small and mid-caps.
Hot or not?
On a scale of zero (freezing) to 100 (boiling), how hot are fund buyers on US equities? Jennifer Hill canvasses opinion
RHAME & GORRELL WEALTH MANAGEMENT
Hightower’s chief investment strategist and portfolio manager, Stephanie Link, is 70 on the scale. Her tone has turned slightly cooler given US equity market outperformance over the past three years and persistently high expectations. Informing her slight sense of caution is fiscal stimulus for 2022 (notwithstanding President Biden’s ‘Build Back Better’ spending bill) being lower than the past two years and the Federal Reserve’s more hawkish stance since being ‘caught flat-footed on elevated inflation’. On the positive, Link believes fiscal and monetary policies seen since the outbreak of Covid-19 along with pent-up consumer demand (which stands to be unleashed once omicron and supply chain issues settle) will lead to above-trend economic growth this year. ‘The key for me to change my stance would be if economic growth fell back to trend: I don’t foresee that happening until 2023,’ she said. Link believes the US is the ‘most transparent and attractive’ stock market globally. ‘Valuations are rich but reasonable in certain sectors,’ she said. She is most optimistic about cyclicals, value stocks and economic reopening beneficiaries, given their lower valuations and under-owned status. Her portfolios are overweight financials, industrials, energy, materials and discretionary stocks. ‘Above-trend growth and inflation, and higher interest rates favor these sectors,’ she said. She is underweight technology and communication services and has been for a while. ‘These long-duration assets will struggle as rates move higher. But there are always opportunities, and should they fall, I’ll be opportunistic, especially in semiconductors and enterprise IT stories.’
HIGHTOWER
Regency Wealth Management in Ramsey, NJ is what associate portfolio manager Mark Andraos describes as ‘cautiously bullish’ on US equities. He puts the firm at ‘about a 60’ on our US equities thermometer. ‘Although valuations are not cheap, US equities are trading at about 21 times forward earnings, which is less expensive than they were pre-pandemic,’ he said. Over the past year, the firm has incrementally increased its allocation to US equities through hedged equity products. Its global equity portfolio now has ‘a little north of 65%’ in US equities. Though the economy is on relatively firm footing, Regency finds it difficult to feel hotter given several key headlines that could increase short-term stock market volatility – from the ongoing spread of Covid-19 to possible adverse effects of the Build Back Better framework and the prospect of the Fed implementing earlier and faster interest-rate hikes. However, Andraos said low and rising interest rates have historically been good for equity markets as the economy continues to strengthen. While technology stocks have had a stellar run, could 2022 be the year the tide finally turns for value stocks? ‘We continue to favor large-cap, well-capitalized companies with strong management that are leaders in their markets, generate superior cashflow, and have clean balance sheets with below-average debt,’ said Andraos. ‘In this vein, we believe that more value-oriented areas of the market will outperform relative to growth, particularly as interest rates continue to climb higher.’
REGENCY WEALTH MANAGEMENT
On the heat spectrum for US equities, Cetera Investment Management in El Segundo, California, is ‘around 50’, according to investment director Brian Klimke. He points to year-end valuations, which show the S&P 500 price-to-earnings (P/E) ratio is in the 92nd percentile based on 15 years of data. This means that the index has only had a higher P/E ratio 8% of the time. Why is he not cold on US equities, then? ‘We are looking at this from a relative perspective and not an absolute perspective,’ he said. Cetera adheres to strict allocations to stocks, bonds and cash in its models, but favors value over growth stocks, and smaller-cap stocks over larger. ‘Smaller capitalization and value stocks have lower valuations; value stocks by their nature have lower P/E ratios, but we also look at this on a relative basis,’ he said. ‘We believe a rotation is starting to occur and we’re entering the next phase of recovery, which could benefit laggards.’ Klimke also highlights equities relative to bonds. Bond yields can be a good predictor of long-term returns and the aggregated bond market currently has a yield of around 1.6%. ‘With inflation less transitory than projected and the labor market recovering, the Fed must act quickly, he said. ‘It will raise rates, which will hurt short-term bond prices. Long-term bond prices will depend more on how well the Fed can control inflation. There’s a lot of risk and limited reward in bonds.’
CETERA INVESTMENT MANAGEMENT
Inflation and supply chain headwinds are expected to ease as the year progresses. And reopening trade will present select opportunities.
Disclosure: The views expressed are as of 12/21, may change as market or other conditions change and may differ from views expressed by other Columbia Management Investment Advisers, LLC (CMIA) associates or affiliates. Actual investments or investment decisions made by CMIA and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be appropriate for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Since economic and market conditions change frequently, there can be no assurance that the trends described here will continue or that any forecasts are accurate. Securities products offered through Columbia Management Investment Distributors, Inc., member FINRA. Advisory services provided by Columbia Management Investment Advisers, LLC. Columbia Threadneedle Investments (Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. © 2022 Columbia Management Investment Advisers, LLC. All rights reserved. CTBPZB5V (12/21) 3953793
As economies transition to recovery from the onset of the pandemic, there will be changes and challenges. Without accommodative monetary policy to support asset prices broadly, investors must be more selective to find quality opportunities. The monetary and fiscal backdrop change Interest rates have been historically low for more than a decade, dampened by the flood of monetary stimulus introduced in the wake of the global financial crisis. In 2022, we expect this to change. As we move toward economic recovery from the Covid-19 pandemic, the new year will be marked by a reversal in monetary policy: Crisis support, stimulus and spending replaced by recovery, repair, reduced fiscal stimulus and a return toward “normal.” Political compromise will be key, not least in the US, as governments tackle the transition. As the support for asset prices is withdrawn, active management — unearthing companies with the enduring qualities that will help them navigate volatility — will be essential to success in 2022. Inflation: No time to panic Transitory inflation is lasting longer than anticipated, but we believe that inflation will moderate through 2022. Helpfully, central banks continue to look through inflationary pressures. For example, the US Federal Reserve has not appeared overly concerned by higher and persistent US inflation, which in previous cycles would have been perceived as a major headwind. Investors and markets are also fairly sanguine. This is in stark contrast to previous shifts in monetary policy in 2013 and 2018, which induced negative market reactions, not least the taper tantrum. Now, the market feels more poised, having waited so long for clarity. This makes us more confident for 2022, albeit in a slowing growth environment. One reason we believe inflation will fall in 2022 is improvements in the supply chain. Regardless of whether you believe Covid or other structural and political factors (in Europe especially) are to blame, many of us underestimated the degree to which the supply chain would impact the corporate backdrop. It is our belief that supply chain headwinds will continue to become less dominant in 2022, but it may well be toward the latter half of the year before the positive impacts are felt.
William Davies
Global CIO, Columbia Threadneedle Investments
Quality will out We’ve seen a good recovery in earnings this year — a reflection of relatively strong balance sheet management by corporates, with stricter cost controls and strong discipline around dividends and share buybacks. The reopening trade and enduring rebound in demand has resulted in heightened cashflows, which have boosted corporate coffers, giving companies the tools to reduce leverage. But given those supply chain bottlenecks and the persistence of inflation, it will be harder for companies to beat forecasts in the way they have in 2021, at least in the short term. For companies, we anticipate next year will be a return to the familiar cycle of earnings disappointment as opposed to positive surprises. In previous cycles, when the yield curve has flattened, the impact on equities has shown investors seeking quality companies that could survive any impending rates shock. As we near the end of 2021, we’ve seen the yield curve steepen, flatten and rise across the curve again. And that has led to a more mixed scenario in terms of what is leading the market. We don’t see that changing in the short term, but some areas that outperformed more recently might struggle, such as ‘meme’ stocks — those that become popular among retail investors through social media platforms. The companies we like — quality businesses with solid balance sheets and competitive advantages — stand a better chance of weathering volatility. Regions Looking regionally, many investors have turned away from China this year because of its well-publicized regulatory crackdown coupled with an imbalanced property market. We recognize the concerns about regulation, Covid outbreaks, extreme weather affecting food production and transportation, and slowing growth. But China recovered first from Covid and did so with a tighter policy framework than other regions. While growth in the country is a major concern, it increases the likelihood of Chinese authorities providing stimulus in 2022. There is opportunity in China (and the rest of the emerging markets universe), but it requires fundamental research and a bottom-up approach — building portfolios company-by-company — rather than a thematic approach. In Japan, prime minister Fumio Kishida does not represent a positive catalyst in the way Shinzo Abe did. Without this political spark and the expectation of meaningful change, Japan has become a less exciting region for investors, notwithstanding improvements in supply chains that will help the country’s industrial nature. That said, active investors are not devoid of opportunities and there is often more breadth in the Japanese market than we give it credit for, not least in the technology and service sectors. The latter is unusual given Covid, but there are ongoing initiatives designed to improve productivity that are unearthing opportunities. Looking to Europe, we expect strong growth, albeit with the potential for supply chain shocks — already evident in the lack of truck drivers and the reduced labor pool. These factors will likely lead to higher than anticipated inflation and peak stimulus. There is also a theme of change in the region: Angela Merkel in Germany remains a strong presence but has stepped down. Germany, led by the Socialist Democratic Party’s Olaf Scholz along with the Greens and Federal Democratic Party, could see more volatility and a preponderance of stimulus. There will also be a presidential election in France in April, and French elections are notoriously difficult to predict. These events will be market influencers, but to what extent is difficult to estimate. A year of change 2022 will be a year of change. We have had an environment of fiscal and monetary stimulus for some time. And when taps are kept open, investors do not mind how much governments and central banks spend or how big a national deficit is. But change is coming, however unwanted it might be, and we face a world of economic repair in which markets and investors must consider the impact of reduced fiscal stimulus.
Bumps in the road
US equities had a marvelous 2021. Buoyed by improving vaccination rates and a sharp economic recovery, the flagship asset class roared back to form as the year reached its end. On 3 January 2022, the S&P 500 touched record highs, in stark contrast to the selloffs witnessed in other areas such as Treasurys. Naturally, this has commentators fretting about a correction in 2022. Markets are never more vulnerable than when they’re floating on hype, and the prospect of a fresh surge in Covid-19 cases has only fueled concerns of an economic slowdown. Some reporters are already talking about a ‘soft lockdown’, with swathes of businesses across America locking their doors voluntarily because of the avalanche of two-line test results. Restaurants are certainly closing in droves, both to mitigate contamination risks and to provide urgent sanitation. Even Walmart, America’s (indeed the world’s) biggest company by revenue, was forced to shutter more than 60 stores in December, the peak shopping month of the year, to sanitize them for the months ahead. There are other headwinds, too. The dollar is currently fluctuating in an atmosphere of heightened currency volatility and the Federal Reserve has already signaled three interest rate hikes for 2022, which will hinder corporate borrowing. Perhaps most significantly, the US inflation rate nosed 40-year highs in 2021, fueled by the Biden administration’s stimulus program. Although the president has sought to correct the problem by shutting specific industries, the inflationary surge has already dented consumer spending. But will these problems parlay into a slump in equities? Or will the market simply ride out the storm, just as it has so many times in the past? Optimism abounds The analysts we spoke to are certainly optimistic. They predict that, while there may be bumps in the road, the American economy will continue to improve – and the omicron variant will cause less disruption than previous Covid iterations. The fact that the US job market is nearing full recovery (at least according to the Fed) only adds grist to their mill. ‘Remember, this is the fourth Covid wave,’ said Sean Peche, manager of the Ranmore Global Equity fund in London. ‘The surprise shouldn’t be the wave, but thankfully, the low hospital admissions and death rates. This means we can start getting back to normal.’
As fears mount that US equities may be headed for a correction, Gareth Platt charts the smoothest routes to alpha
‘We are in the very early stages of what could be an incredibly powerful jobs cycle’
Ross Yarrow, Robert W Baird
Ross Yarrow, managing director of US equities at Robert W Baird, is even more optimistic on the basis that there ‘finally appears to be a solid disconnect’ between Covid cases and deaths. ‘US cases are up more than five times since November [as of January 3], but the absolute number of deaths is down,’ he said. ‘The hospitalization risk with omicron is up to 70% less than delta, so combine this with the fact we are closer to herd immunity, through vaccination and natural immunity, there really is light at the end of the tunnel.’ He believes the employment picture could improve further, creating the potential for sharper consumer spending hikes. ‘Ultimately, the single most important determinant of market direction is employment. It’s very rare for the market to peak for the cycle when employment is rising. Employment has only just recovered above the trough levels of 2009/10. We are in the very early stages of what could be an incredibly powerful jobs cycle.’ Stark imbalances None of this is to say that certain areas of the market are not overvalued right now. The tech sector, for instance, is going through one of those periods that gets analysts all fidgety – a phase of ultra-rich valuations which will, sooner or later, be punctured (though it’s worth noting that tech’s share of the overall market, in relation to its earnings, is far smaller now than it was in 2000 when the dotcom bubble burst). More broadly, one might argue that the market has skewed too heavily in favor of growth stocks, as opposed to value. It’s hard not to conclude that investors have rushed to younger, sexier holdings at the expense of the tried and tested. The flipside, of course, is the opportunity. JP Morgan reckons that investors could reap real rewards by turning to old-timer stocks like Bank of America, Caterpillar and McDonald’s (which, despite lockdowns, has continued to smash earnings estimates throughout the pandemic).
‘Thankfully, hospital admissions and death rates are low. This means we can start getting back to normal’
Sean Peche, Ranmore Fund Management
In parallel, readers would be wise to consider the consequences of the rush towards passive investment funds, which has led to a concentration of activity around a relatively small number of companies. As Peche notes, the five largest companies in the Russell 1000 index are now worth $10tn, more than the smallest 763 combined. Timely moves In this environment, a shift towards small- and mid-cap stocks, which may have been overlooked by analysts, could prove timely. Above all, investors need to drill down, kick the tires and take a laser-focused, sector-by-sector approach. At the most basic level, of course, this means avoiding those sectors that are likely to be buffeted by a rise in Covid cases. The US domestic travel sector, for example, enjoyed a sharp pickup over Christmas but any new national or local restrictions will severely dent its recovery. It also means going beyond the headline hype and doom-mongering. The boom in tech stocks might peter out this year, but Jacob Pozharny, head of international equity at Bridgeway Capital Management, is bullish on niches like semiconductors, which remain in feverish demand and are likely to be burnished by a move to local chip factories. The same kind of strategy can be applied to other sectors, too. The restaurant market may be facing a tricky time over the next few months, but the online food delivery arm is continuing to grow, propelled by the relentless increase in e-commerce. Such rigor may not be necessary in the end. It may be that the equities market enjoys another stellar year in 2022, with rosy returns across the board. But, in a world of so many moving parts, a keener focus may not hurt.
Finding opportunities and managing valuations in a volatile market
Navigating Large Caps with a Sustainability Lens
Impax Asset Management LLC, formerly Pax World Management LLC, is investment adviser to Pax World Funds. Pax World Funds are distributed by Foreside Financial Services, LLC. Foreside Financial Services, LLC is not affiliated with Impax Asset Management LLC. You should always consider Pax World Funds’ investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please download a fund prospectus. Please read it carefully before investing. Risks Investments involve risk, including potential loss of principal. Equity investments are subject to market fluctuations, the fund’s share price can fall because of weakness in the broad market, a particular industry, or specific holdings. The Fund is actively managed. The investment techniques and decisions of the investment adviser and the Fund’s portfolio manager(s), including the investment adviser’s assessment of a company’s ESG (Environmental, Social and Governance) profile when selecting investments for the Fund, may not produce the desired results and may adversely impact the Fund’s performance, including relative to other Funds that do not consider ESG factors or come to different conclusions regarding such factors.
The Pax Large Cap Fund from Impax Asset Management focuses on bottom-up stock selection to identify large cap opportunities that are attractively priced and are well positioned for the transition to a more sustainable economy, including positive ESG (environmental, social and governance) performance. The strategy uses a proprietary Sustainability Lens and ESG research to better manage sustainability risks and identify opportunities, and it is fossil fuel free. Citywire spoke with Pax Large Cap Fund portfolio manager Andy Braun about what makes the strategy a compelling addition to portfolios. Citywire: What differentiates your strategy from other active large cap equity funds? Andy Braun: It starts with our firm’s overall focus on the transition to a more sustainable economy. We see this transition as a move from a more depletive economic model, where externalities are largely ignored, to a more sustainable economy with improved environmental and social outcomes. We think this transition will have profound implications as some higher opportunity industries and companies will enjoy tailwinds and others will face more risk and thus encounter headwinds. This philosophy shapes the proprietary tools we use in our investment process, including the Impax Sustainability Lens and Impax Systematic ESG Rating derived from our ESG research, which help us identify the sub-industries and companies that are well positioned for this transition. CW: Can you describe your approach to sustainability generally? AB: We take a three-pronged approach to the sustainability aspects of our portfolio management. From the top down, we use a macro tool called the Impax Sustainability Lens, which considers economic opportunities and risks associated with the transition to a more sustainable economy. It’s really designed to evaluate such risks and opportunities at the sub-industry level and then rank those from high to low. The tool helps us identify areas of the market that we believe will likely encounter transition tailwinds and headwinds. From the bottom up, we’re using our Impax Systematic ESG Rating, which rates companies using 72 ESG performance and risk indicators. This helps us narrow the universe and identify companies with favorable ESG profiles within a given sector and industry. The third prong is our in-depth fundamental analysis of a company, which includes ESG research. This includes a comprehensive assessment of the management team and analysis of other factors, including ESG factors, that cannot be compiled in a systematic way or via publicly available documents. The result is a portfolio where we really understand the quality and character of our holdings.
CW: Can you expand on the ESG rating and how it factors into building high conviction portfolios? AB: Our rating looks at every large cap company in the US from an ESG perspective. Companies in the Russell 1000 are rated from 0 to 10 based on specific performance and risk indicators relative to their industry. This tool helps us identify which companies we believe are truly best-in-class and it helps prioritize additional fundamental research and ESG analysis at an early stage in the process. Based on the systematic ratings, we’re looking for the top quartile performers in a given industry or sector. Those are the companies that perform well on ESG metrics today. Second quartile companies are those we believe have the potential for improved ESG performance. These two quartiles are where we focus the bulk of our research and coverage. We exclude the lowest quartile of performers from the strategy. The end result is a portfolio where the median company is a top quartile performer based on our view of ESG. CW: Valuations in large cap stocks are very high, can you describe how you identify opportunities that are attractively priced? AB: Developing a thesis around the valuation of a company is a core part of our process. When we research a new company and enter a position in the portfolio, we really like to see a catalyst or a series of potential catalysts that can provide meaningful upside to the current price of a stock looking out typically over a 12- to 18 month timeframe. Once a company is in the portfolio, we are very disciplined on price targets. In our part of the market, there are stocks viewed as “sustainability darlings,” and those companies can get overpriced very quickly. So we try to be very nimble in terms of position sizing when we feel a stock is reaching full and fair value. CW: So against this portfolio construction backdrop can you touch on some of your investment themes for 2022? AB: Yes, as a result of our investment philosophy and approach there are a number of portfolio holdings that relate back to sustainability themes. We think of these themes as megatrends that will persist in the market for the next decade or longer. We have identified six such megatrends including resource efficiency; vehicle electrification and autonomous driving; the revolution in cloud computing; clean water; access to finance; and then lastly, transformative healthcare. We’re looking for companies that are either leading one of these megatrends or have significant exposure to one or more of them. For example, if we look at resource efficiency as a megatrend, this could include companies that save energy or cut down on the overall resource footprint of their customers. Companies that support resource efficiency are going to be a real win-win over time.
Andy Braun
Pax Large Cap Fund portfolio manager, Impax Asset Management
Combining quality and growth to identify long-term compounders and avoid serial small caps
Harness the Compounding Potential of Small Caps
Past performance does not guarantee future results and profitable results cannot be guaranteed. There can be no assurances that any portfolio characteristics depicted herein shall be replicated in the future. Returns are presented gross and net of management fees and have been calculated after the deduction of all transaction costs and commissions and include the reinvestment of all income. Net of fee performance was calculated using actual management fees. This information is provided for illustrative purposes only. Opinions and views expressed constitute the judgment of Polen Capital as of December 2021 may involve a number of assumptions and estimates which are not guaranteed and are subject to change without notice or update. Although the information and any opinions or views given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness, or accuracy. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice, including any forward-looking estimates or statements which are based on certain expectations and assumptions. The views and strategies described may not be suitable for all clients. This document does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction.
Gains acquired from gains, or growth on top of growth. No matter the phrasing, compounding potential is what we believe most investors seek and what many agree drives long-term wealth creation. When it comes to small-cap investing, we think this compounding potential can often be underappreciated or overshadowed by the perceived risks of this group. In our experience, emphasizing high-quality businesses — rather than chasing illusory high growth with no to low profits — can offer sustainable and compelling alpha generation with lower volatility. Two sides to compounding Compounding has two faces: positive or negative. Just as growth and returns compound, debt, poor management, and a lack of fiscal discipline can also compound. Companies that are mired in debt, have little to no profits, or reinvest poorly can potentially put themselves in untenable situations that make it difficult to reverse course. In our view, aversions to investing in the small-cap space are often rooted in experiences with or perceptions of these types of ‘lower-quality’ companies. For the Polen Capital Small Company Growth team, our investment process focuses on both growth and high-quality characteristics. We define and identify high-quality companies based on our ‘Flywheel’ criteria, as shown in Figure 1. We believe companies with these high-quality traits combined with durable growth have the optimal conditions for positive, long-term compounding. Figure 1: Our Flywheel
Reinvesting to play the infinite game It’s critical to note that growth does not always equate to compounding. Compounding means that for an investment made, returns are captured from both the principal investment and the proceeding gains or interest made over time. Therefore, compounding occurs only in conjunction with current earnings, attractive growth opportunities, and reinvestment. In our experience, great companies flourish through evolution, not spontaneous combustion. We believe companies seeking to sustain their competitive advantage must play the infinite game and constantly find ways to grow their product offerings, expand geographically, or attract new customers. Speculative businesses or those with limited profits, high debt levels, and low returns typically lack the excess earnings or high returns on invested capital (ROIC) investment opportunities that, together, are required for compounding. While it is possible to generate returns with these types of investments, our experience has shown us that these opportunities are often shorter-term in nature. We refer to these ‘point-in-time’ investments as serial small caps and contrast them with the compounders we seek to own in the Polen Small Company Growth team strategies. Figure 2: Characteristics of compounders vs. serial small caps
Flywheel in the face of volatility In our experience, continuous, dogged, incremental improvements over time drive compounding, and these improvements can result in sizeable growth when coupled with a long investment horizon. Returns from these incremental improvements may not be immediately visible or tangible, but it is why we believe patience and discipline can be a significant advantage. Our Flywheel serves as our North Star, allowing us to remain disciplined and invested even in the face of volatility, as long as our required conditions remain intact. We think our Flywheel criteria ensure that the right characteristics are in place to support compounding and increase our chances of success. In today's investing environment where few information advantages remain, we believe our focus on high quality, growth, and long-term ownership gives us a behavioral edge. By prioritizing both quality and growth, we believe we can overcome the psychological obstacles that can lead to owning more volatile businesses, avoid permanent loss of capital, preserve capital during market declines, reduce bias in decision-making, and support long-duration participation in the asset class.
To learn more, please visit the Polen Capital Small Company Growth team page.
Silencing the tech cynics
Tech stocks have had another stellar year: the S&P 500 technology sector soared 33.4% in 2021, ahead of an index return of 28.7%. Now, as markets enter a new year, large-cap tech stocks have been mired in volatility. The first two weeks of January saw stocks sell off across all sectors, including tech. Prices have since moved back up, but the long-term trend remains unclear. Several competing narratives, from Covid to inflation to earnings, could all put pressure on large-cap tech stocks in 2022. The year began with a mixed bag of economic data for tech stocks. Inflation remains elevated, the Federal Reserve made it clear that rate hikes are likely this year, and a miss on the jobs number took some investors by surprise. Couple all of that with new concerns over Covid variants and markets were skittish at best. Rising interest rates and higher inflation have historically led to a discount in valuations – which could negatively impact large-cap tech stocks. However, new variants of the virus have put off many companies’ return-to-office plans and more schools are considering going remote, at least temporarily. That could be beneficial for the tech companies that people rely on to support remote work. After years of steadily climbing valuations, large-cap tech investors say this environment could be the market they’ve been waiting for. ‘Ultimately, the volatility is creating buying opportunities for us,’ said R Burns McKinney, managing director and a senior portfolio manager/analyst at NFJ Investment Group. ‘Anytime you see price moves that aren’t necessarily based on the fundamentals – they’re based on something like the jobs report, for example – that is a point where we could see attractive pricing. If markets remain very reactive throughout the year, the potential for new opportunities grows.’
A wobble in early January may not spell the end of the tech bull run, writes Bailey McCann
‘If tech companies deliver a second consecutive quarter of positive earnings, despite everything going on, that’s a strong counter to the pessimism’
Wayne Ferbert, Alpha DNA Investment Management
Ferbert looks for companies that are undervalued by the market and by analysts. Last quarter was a positive environment for this kind of strategy, as many tech names like data warehousing company Snowflake ended up doing better than expected. ‘Everyone is trying to figure out what the discount is going to be, whether it comes from inflation or slower growth or something else,’ he said. ‘But we’re looking for companies that have been able to show steady growth and there are still a lot of companies in tech that are doing that.’ David Barse, founder and CEO of Xout Capital, agreed. He said there have been a lot of momentum trades over the past year and while it’s easy to follow them, there are also opportunities to be found by looking at how companies are growing through the cycle. ‘Companies have been under a lot of different types of pressure recently,’ he said. ‘There is an opportunity to collect a lot of data right now – what is the revenue growth, how are companies managing labor, are companies buying back shares or focusing on capex? ‘If a company can lead technological change and is managing well through the cycle, these other narratives have less of an impact.’
‘Anytime you see price moves not based on the fundamentals, that is a point where we could see attractive pricing’
R Burns McKinney, NFJ Investment Group
Large-cap tech stocks don’t often get talked about as part of a dividend strategy but NFJ’s McKinney argued that they should be. ‘The key thing here is dividend growth,’ he said. ‘If you’re comparing dividends, tech stocks might have a lower number right now, but the high-growth nature of these companies means that their dividends are likely to grow over time. ‘Dividend growth might be harder to achieve over time in very mature companies, especially if those companies are part of the legacy economy.’ For McKinney, dividend policy can be used as a check on how confident management teams are about the direction of future earnings. Tech stocks tend to have more cash on their balance sheets and lower overheads, which create better prospects for dividend growth. ‘That math is really core to how we look at the space,’ he added. ‘Companies that have strong prospects for future dividend growth tend to be better-quality businesses overall.’
Changing narratives In some ways, the selloff in early January had been expected for a while. Money managers and analysts went into the fourth quarter of last year with subdued expectations about earnings in tech. Rising inflation and economic reopening were supposed to hit tech stocks. However, strong fourth-quarter earnings in large-cap tech halted that narrative – at least for another quarter. If the selloff proves to be temporary and first-quarter earnings come through positively, the tech cynics could be silenced. ‘There was this narrative out there that Covid effectively pulled forward a lot of tech earnings and these companies wouldn’t be able to keep it going,’ said Wayne Ferbert, co-founder and managing director of Alpha DNA Investment Management. ‘The fourth quarter really called that view into question. If tech companies deliver a second consecutive quarter of positive earnings, despite everything else that is going on, that’s a strong counter to some of the pessimism that’s out there.’
Reaping dividends Large-cap tech could prove to be a solid area for dividend investors this year, too. Strong earnings and solid fundamentals are leading to dividend growth in some large-cap tech stocks, giving investors new sources of yield. Typically, dividend strategies are dominated by mature industrial, consumer and financial companies that have boasted relatively high and steady dividends for years. Investments in real estate investment trusts are another popular source of income.
Secular Industry Trend: Public Cloud
Identifying Growing Large Caps in Growing Industries
This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions. Information and opinions expressed are those of the authors and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC, or affiliates. Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Information is current as of the date appearing in this material only and subject to change without notice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. This material may include estimates, outlooks, projections, and other forward-looking statements. Due to a variety of factors, actual events may differ significantly from those presented. Past performance is not indicative of future returns. Investing involves risks, including the possible loss of principal. The strategy invests most of its assets in equity securities of large cap domestic growth companies where the primary risk is that the value of the equity securities it holds might decrease in response to the activities of those companies or market and economic conditions. Individual securities may not perform as expected or a strategy used by the Adviser may fail to produce its intended result. Different investment styles tend to shift in and out of favor depending on market conditions and investor sentiment, and at times when the investment style used by the Adviser is out of favor, the strategy may underperform strategies that use different investment styles. Diversification does not ensure against loss. Any investment or strategy mentioned herein may not be suitable for every investor.
Some investors believe that it can be difficult for active managers to add value in the large-cap segment of the equity market. Jim Golan, CFA, and David Ricci, CFA, who co-manage the William Blair Large Cap Growth strategy, have a different perspective. Their investment philosophy is centered on identifying growing companies in growing industries — what they call structurally advantaged companies — whose long-term growth is underappreciated by the market. They believe this approach can deliver a differentiated large-cap portfolio that provides a diversity of growth drivers and a smoother ride for investors, and has the potential to provide outperformance over time. What is a structurally advantaged company? David: Simply put, it is a company that we believe will be better off in three to five years than it is today. More specifically, a structurally advantaged company is likely to grow its share of an industry growing at least as fast as the overall economy. Can you elaborate on the characteristics of a structurally advantaged company? Jim: We evaluate not only a company’s position within an industry, but also the industry itself. We have to build confidence, through our deep and intensive research process, that a company can sustain an increasing share of its industry’s profit pool over the next three to five years. In addition, the industry’s profits must be growing at least as fast as the overall economy — preferably faster.
How does cyclicality impact your three- to five-year industry outlook? Jim: First and foremost, we evaluate long-term secular drivers to gain confidence about the durability of an industry. Every industry in which we seek to invest exhibits a long-term growth profile that is ‘up and to the right.’ However, some industries will have more cyclicality—both in terms of revenue and margins — around that long-term growth trajectory. As a result, we are mindful of where an industry lies on its profit life cycle. David: For example, the US home-improvement industry is correlated to existing home sales as well as overall consumer discretionary income; both are influenced by interest rates. In late 2008, following the Great Recession, the housing industry was hard hit and home improvement spending was depressed significantly. While the recovery of the industry was likely to be slow, the US Federal Reserve committed to supporting the economy with sustained low interest rates. As a result, we had good visibility on a long-term recovery in home-improvement spend from levels that were not only below peak, but also below the long-term trend. How do you evaluate whether a company is likely to take share of industry profit pool? David: We look at a variety of historical and forward-looking measures to both quantitatively and qualitatively assess the durability of a company’s competitive advantage. Some examples include the effectiveness of research-and-development spend, strong company culture, product patents, unique distribution, pricing power, and financial strength. Ultimately, these attributes allow a company to build a competitive moat that can generate above-average revenue growth, margins, free cash flow, and investment returns over a multiyear period. Our team’s collective experience of more than 100 years is critical in determining the leaders in favored industries.
Jim Golan, CFA, Partner
Portfolio Manager
David Ricci, CFA, Partner
We evaluate not only a company’s position within an industry, but also the industry itself. The industry’s profits must be growing at least as fast as the overall economy — preferably faster
JIM GOLAN, CFA
Can you provide an example of a structurally advantaged industry? David: A good example would be the global animal health industry, which serves companion animals as well as livestock. Companies in this industry provide diagnostic tests, vaccines and antibiotics to veterinarian clinics and farmers. The industry is exposed to two secular growth tailwinds. First, with a growing middle class across the globe, especially in emerging economies, people’s diets are evolving to include more protein, resulting in steady growth in demand for livestock. Second, coincident with the decline in human birth rates, we have seen an increasing propensity for households to include companion animals and with that, heightened attention to the healthcare of pets. In addition, treatments for companion animals do not have the same type of reimbursement issues as human healthcare, so downward pricing pressure isn’t as significant. As a result of these tailwinds, in addition to new product development and slightly greater corporate concentration, this industry is growing revenue faster than the overall economy with healthy margins.
Companies in healthy industries that are taking share of the industry profit pool typically achieve faster profit growth than the overall market
DAVID RICCI, CFA
Why is buying only structurally advantaged companies critical to the success of the strategy? David: We believe that buying the right companies and holding them for several years is the single most important way we add value. Our intention is to hold companies that create their own economic value, and participate in that value creation as shareholders. In essence, the companies are working for us and in turn our clients. Companies in healthy industries that are taking share of the industry profit pool typically achieve faster profit growth than the overall market. As emerging and current market leaders, these companies tend to exhibit healthy return on capital and cash flow characteristics, two metrics of importance to us. Is a structurally advantaged company an automatic buy in your investment process? David: Not necessarily. While we buy only structurally advantaged companies, we do not buy all structurally advantaged companies. The key question is whether we believe the stock is priced such that it can exceed the return of the index over five years. We don’t spend much time discussing near-term multiples of earnings or cashflow. Instead, our focus is on earnings growth potential and where we think the stock can trade in the future. We need to have deep conviction in the ability of these companies to deliver total shareholder returns that exceed the market rate of return, which in turn gives us the opportunity to outperform. Our batting average has to be high, so we set a high bar for all new purchases. Are there other reasons why you wouldn’t buy a structurally advantaged company? Jim: Portfolio diversification is critically important. We typically own only 30 to 40 stocks, so each has to stand on its own as well as add to the overall diversification of the portfolio. We seek to identify stocks with unique economic drivers relative to other holdings in the portfolio. For example, if an oligopolistic industry exhibited strong secular growth, we would likely choose to hold only one of the companies — where our confidence in the durability of growth is highest and/or the risk-reward opportunity is most attractive. Our focus is on identifying the best opportunities within each sector and across market capitalizations, resulting in a portfolio that tends to be broadly neutral relative to the benchmark across sectors and market capitalizations. Diversification across these dimensions has helped provide a smoother experience from a relative performance perspective. Further, it has allowed for our selection of stocks and industries to be the primary driver of relative performance. This focus on growing companies and industries has been key to our ability to deliver compelling investment outcomes over the years.
Active Never Rests : Discover how active is more than just an investment approach at William Blair. Visit: https://active.williamblair.com.
TM
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The above information must be submitted to the following Citywire copyright agent: Ona Kviliute +44 (0)20 7840 5125 okviliute@citywire.co.uk 3 Spring Mews, London, SE11 5AN, United Kingdom UNDER FEDERAL LAW, IF YOU KNOWINGLY MISREPRESENT YOUR CLAIM, YOU MAY BE SUBJECT TO CRIMINAL PROSECUTION FOR PERJURY AND CIVIL PENALTIES, INCLUDING MONETARY DAMAGES, COURT COSTS, AND ATTORNEYS’ FEES. In accordance with the DMCA and other applicable law, Citywire has adopted a policy of terminating, in appropriate circumstances, the accounts of users who are deemed to be infringers. Citywire may also, at its sole discretion, limit access to the Site and/or terminate the accounts of any users who infringe any intellectual property rights of others, whether or not there is any repeat infringement. 7. Acceptable Use Policy 7.1 You may use our Site only for lawful purposes. You may not: (i) use our Site in any way that breaches any applicable local, national or international law or regulation; (ii) use any materials, data or information which you have obtained from the Site in any manner which, in Citywire’s reasonable opinion, is derogatory, damages Citywire’s reputation or takes advantage of it in any way; (iii) use our Site in any way that is unlawful or fraudulent, or has any unlawful or fraudulent purpose or effect; (iv) use our Site to send, knowingly receive, upload, download, use or re-use any material which does not comply with the Content Standards; (v) subject to Clause 5, deep-link to any portion of our Site for any purposes without the prior written permission of Citywire; (vi) perform any automated use of our Site, such as, but not limited to, using robots, spiders, scripts to create Contributions, to extract any of the content of our Site through such means as ‘screen scraping’, ‘database scraping’ or otherwise; (vii) violate the restrictions in any robot exclusion headers on this website or bypass or circumvent other measures employed to prevent or limit access to our Site; (viii) use this service as research or support for, or to inform your own or your company’s or employer’s subscription based service, or any subscription based service without obtaining a licence from Citywire in writing, such licence to be on commercial terms agreed by the parties; (ix) use our Site (or any of the Content) for the purpose of building a database or to use this for your own commercial exploitation by its inclusion in your own activities and/or services without obtaining the written approval of Citywire in advance of its publication; (x) access, use, or distribute the Site, App (or any Content) to develop (or assist any third party in developing) a product or service (including events) that competes with any product, service, or event of Citywire, or for any other competitive purposes. 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These content standards apply to each part of any Contribution as well as to its whole. 8.2 Contributions must: (i) be accurate (where they state facts); (ii) be genuinely held (where they state opinions); and (iii) comply with applicable law, rules and regulations, in the U.S. and in any country from which they are posted. 8.3 Contributions must not: (i) infringe or promote infringement of any copyright, database right, trade mark or other intellectual property right of any other person (including, promoting or offering pirated computer programs or links to such programs, information used to circumvent manufacturer-installed copy-protect devices, including serial registration numbers for software programs, rights management information or any type of cracker utilities); (ii) contain intentionally made false or misleading statements; (iii) offer to buy, sell or broker an investment; (iv) violate applicable laws, rules or regulations, including without limitation, rules or regulations of any applicable stock exchange or breach insider dealing regulations or confidentiality agreements; (v) involve commercial activities and/or sales without prior written consent from us such as contests, sweepstakes, group-buying, advertising, or pyramid schemes; (vi) be made in breach of any legal duty owed to a third party, such as a contractual duty or a duty of confidence; (vii) contain any material or link to material which: a. is defamatory of any person; b. is obscene, vulgar offensive, hateful or inflammatory; c. is likely to harass, upset, embarrass, alarm or annoy any other person; d. is threatening, abusive or invade another’s privacy, or likely to cause annoyance, inconvenience or needless anxiety; e. contains or promotes sexually explicit material or violence; f. promote discrimination based on race, sex, religion, nationality, disability, sexual orientation or age; or g. is likely to deceive any person; (viii) use invalid or forged headers to disguise the origin of any Contribution, or otherwise misrepresenting yourself or the source of any Contribution; (ix) use our Site to transmit, or procure the sending of, any unsolicited or unauthorised advertising or promotional material or any other form of similar solicitation (spam); (x) be used to impersonate any person, or to misrepresent your identity or affiliation with any person; (xi) give the impression that they emanate from Citywire or a Citywire employee, administrator or moderator, or another user of our Site; or (xii) advocate, promote or assist any illegal activity. 9. Non-reliance 9.1 You agree that you are responsible for your own investment decisions and that you are responsible for assessing the suitability and accuracy of all information and for obtaining your own advice thereon. You recognise that any information given on our Site is not related to your particular circumstances. Circumstances vary and you should seek your own advice on the suitability to them of any investment or investment technique that may be mentioned. (a) We do not provide, and no Content constitutes, investment advice; (b) You will not treat or represent Content as investment advice; (c) We do not recommend or endorse any product; (d) Content is not intended to address your particular requirements. We are not aware of circumstances specific to you and which could influence which financial products are more or less suitable for you and do not represent that we are aware of any such circumstances. 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The provisions concerning Intellectual Property Rights, The Site, Contributions, Non-Reliance, Limited Warranty, Liability, Breaches; Term and Termination, Enforcing Security, Governing Law, Arbitration, Injunctive Relief, Waiver and Severability and Entire Agreement the Solution Feedback, Confidentiality, will survive the termination of these Terms and Conditions for any reason. 13.2 You agree to indemnify Citywire against any and all actions, claims, costs, proceedings, losses, damages or liabilities arising from your use of the Site or App (including without limitation Contributions or Content) and/or in relation to any information or data you use or access by means of the Site. 13.3 You acknowledge that a breach of these Terms may give rise to civil damages and criminal penalties. Citywire reserve the right to take action against you to uphold these Terms and its rights, which may involve pursuing injunctive proceedings, as further set forth below. 14. Enforcing Security You may not use the Site, App, Content or any of Citywire’s data, systems, network, or services to engage in, foster, or promote illegal, abusive, or irresponsible behavior, including, without limitation, accessing or using data, systems, or networks in an unauthorized manner, attempting to probe, scan, or test the vulnerability of a Citywire system or network, circumventing any Citywire security or authentication measures, monitoring Citywire data or traffic, interfering with any Citywire services, collecting or using from the Site email addresses, screen names, or other identifiers, collecting or using from the Site information without the consent of the owner or licensor, using any false, misleading, or deceptive TCP-IP packet header information, using the Site to distribute software or tools that gather information, distributing advertisements, or engaging in conduct that it likely to result in retaliation against Citywire or its data, systems, or network. 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Governing Law; Void Where Prohibited All offers for all functions, products or services, which are made on the Site, are void if they are prohibited by applicable law. You access the Site on your own volition and are responsible for compliance with all applicable laws with respect to your own access and use of the Site and its offerings. These Terms have been made in and will be construed and enforced in accordance with the laws of the State of New York, U.S.A. as applied to agreements entered into and completely performed in the State of New York (without effect to its conflicts of law provisions). 16. Arbitration Subject to the right of Citywire to seek injunctive relief, disputes will be will be resolved by binding, individual arbitration under the American Arbitration Association pursuant to its Commercial Arbitration Rules or pursuant to its International Centre for Dispute Resolution (ICDR) Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having competent jurisdiction thereof. There is no judge or jury in arbitration, and court review of an arbitration award is limited. For any arbitration, the arbitrator(s) selected shall have a minimum of ten years of experience with and knowledge of the subject matter of the claim and dispute. The place of arbitration shall be in New York, New York. The arbitrator shall be bound by the provisions of these Terms and base the award on applicable law and judicial precedent. The arbitrator may award money or equitable relief in favor of only the individual party seeking relief and only to the extent necessary to provide relief warranted by that party’s individual claim. Similarly, an arbitration award and any judgment confirming it apply only to that specific case; it cannot be used in any other case except to enforce the award itself. However, the arbitrator(s) may award to the prevailing party all of its costs and fees. “Costs and fees” mean all reasonable pre-award expenses of the arbitration, including the arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses such as copying and telephone, court costs, witness fees, and attorneys’ fees. Upon rendering a decision, the arbitrator(s) shall state in writing the basis for the decision, including the findings of fact and conclusions of law upon which the decision is based. 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You therefore agree that Citywire shall be entitled, in addition to other available remedies, to seek and be awarded an injunction or other appropriate equitable relief from a court of competent jurisdiction restraining any breach, threatened or actual, of your obligations under any provision of this Terms. Accordingly, you hereby waive any requirement that Citywire post any bond or other security in the event any injunctive or equitable relief is sought by or awarded to Citywire to enforce any provision of these Terms. 18. Waiver and Severability Failure to insist on strict performance of any of the terms and conditions of these Terms will not operate as a waiver of any subsequent default or failure of performance. No waiver by Citywire of any right under these Terms will be deemed to be either a waiver of any other right or provision or a waiver of that same right or provision at any other time. 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No joint venture, partnership, employment, or agency relationship exists between you and Citywire as a result of these Terms or your utilization of the Site. These Terms represents the entire agreement between you and Citywire with respect to your individual use of the Site. These Terms may not be assigned, transferred, conveyed, delegated, or granted by you to another party or person without the prior written consent of Citywire.
This communication is by Citywire Financial Publishers Ltd (“Citywire”) and is provided in Citywire’s capacity as financial journalists for general information and news purposes only. It is not (and is not intended to be) an any form of advice, recommendation, representation, endorsement or arrangement by Citywire or an invitation to invest or an offer to buy, sell, underwrite or subscribe for any particular investment. In particular, the information provided will not address your particular circumstances, objectives and attitude towards risk. Any opinions expressed by Citywire or its staff do not constitute a personal recommendation to you to buy, sell, underwrite or subscribe for any particular investment and should not be relied upon when making (or refraining from making) any investment decisions. In particular, the information and opinions provided by Citywire do not take into account your personal circumstances, objectives and attitude towards risk. Citywire uses information obtained primarily from sources believed to be reliable (such as company reports and financial reporting services) however Citywire cannot guarantee the accuracy of information provided, or that the information will be up-to-date or free from errors. Investors and prospective investors should not rely on any information or data provided by Citywire but should satisfy themselves of the accuracy and timeliness of any information or data before engaging in any investment activity. If in doubt about a particular investment decision an investor should consult a regulated investment advisor who specialises in that particular sector. Information includes but is not restricted to any video, article or guide content created or provided by Citywire. For your information we would like to draw your attention to the following general investment warnings: The price of shares and investments and the income associated with them can go down as well as up, and investors may not get back the amount they invested. The spread between the bid and offer prices of securities can be significant in volatile market conditions, especially for smaller companies. Realisation of small investments may be relatively costly. Some investments are not suitable for unsophisticated or non-professional investors. Appropriate independent advice should be obtained before making any such decision to buy, sell, underwrite or subscribe for any investment and should take into account your circumstances and attitude to risk. Past performance is not necessarily a guide to future performance.
Citywire Investment Warning