Thursday, January 12, 2012 10:08:20 AM
MFS Chief Chooses Credit and Tech for 2012
Quarter trillion dollar strategist makes calls on 2012 and ups frequency of portfolio turnover.
(January 12, 2012)
-- Corporate high yield bonds and
technology stocks will be the outperforming securities in 2012, according to MFS Chief Investment Strategist James Swanson.
The head strategist at $250 billion dollar MFS Investment
Management outlined his picks for the coming year in London yesterday, amid
continued turbulence in European markets.
Swanson said that since Christmas he had increased his
holding of high yield debt, some of the riskiest credit bets available, as the
market was pricing in an upcoming recession in the United States that he did
not foresee.
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He said the spread over US Treasuries – the yields of which
were being forced lower by actions by the Federal Reserve and a perceived ‘safe
haven’ status by investors – was attractive.
Technology companies would also play a part in creating outperformance,
according to Swanson, as he said they were cheap and likely to grow in the
immediate future and offer dividends to investors.
Swanson said: “In terms of valuation – private equity firms
are paying up to 40 times book value to own a piece of these firms. On the
public market they are trading at around 11 times. It’s remarkable mispricing.”
He added that companies were holding huge levels of cash on
their balance sheet and the average age of technology equipment was reaching
record highs. This indicated there might soon be a flurry of spending in this
sector, he said.
Despite sitting at historical low valuation, Swanson said he
was not tempted to start buying bank stocks.
He said: “When the Fed raises reserve rates again – and it
has said this will not be until 2013 - they will become interesting, but at the
moment, they are not earning through issuing loans so there is no excitement
for an investor.”
The ever-changing economic conditions have also forced
Swanson to change his investment style and change the securities in his
portfolio more quickly.
He said: “Due to the market conditions, which at the moment
change very rapidly, I have become nimbler with stock turnover. From rotating
stocks four or five times year, I am now moving them six times a year – that’s
an increase of 50%.”
At the end of December 2011, MFS managed $253 billion in institutional
and retail global client assets.