Utility of the future, buying European equities, and the best first quarter in 21 years?

Alister Sneddon, CTO

Here are the top 3 insights for June 7th, prepared by Alister, our CTO.

Today’s Brief

  • Deloitte: Digital innovation — Creating the utility of the future
  • Eastspring Investments: European Equities: A good time to start buying?
  • Janus Henderson: Was It Really the Best First Quarter in 21 Years?

Digital innovation: Creating the utility of the future

  • The power and utilities sector was traditionally where many parents or grandparents parked their savings as they got older, attracted by low volatility and stable returns.
  • While solid and dependable, the sector wasn’t generally considered cutting-edge, innovative, or exciting by any stretch of the word.
  • Its main goal was to keep the lights on without breaking the bank.
  • Fast forward to today and, while still laser-focused on reliability and affordability, the power and utilities sector appears to be morphing into an increasingly attractive, high-tech magnet for a multitude of new players.
  • From large conglomerates in the technology, retail, oil, and other sectors to asset managers and hot new tech startups, a lot of outsiders are looking to enter this market.
  • Why? The sector is being reshaped by forces that have been evolving and converging for more than a decade.
  • From rising costs and changing load patterns, to newly viable technologies, regulatory change, and the growing call to decarbonize, disruptive forces are transforming the industry, driving it toward a new and different future.

Genuine Scores for the top 3 Utility stocks

  • Drax Group, 69
  • AGL Energy, 67
  • Contact Energy, 62

European Equities: A good time to start buying?

  • European equities may rally strongly in the near term, fuelled by improving macro indicators, attractive valuations and low investor exposure.
  • While nimble investors can take advantage of this rally, we caution that the Eurozone’s structural problems are likely to continue to weigh on the region’s growth and inflation, limiting the market’s upside potential over the longer term.
  • European equities have underperformed even Japanese stocks by over 10% in the last five years and returned 78% less than US equities in total return terms (USD).
  • This lacklustre performance is partly the result of the Eurozone’s persistent structural problems.
  • Yet the prospects for European equities may be looking brighter in the near term.

Genuine Scores for top 3 European focused Equity funds

  • HgCapital Trust, 75
  • Standard Life Private Equity Trust, 74
  • Xtrackers MSCI Europe Hedged Equity ETF, 68

Was It Really the Best First Quarter in 21 Years?

  • Globally, equities delivered strong gains during the first three months of 2019, with the S&P 500 Index delivering its best first quarter in more than 20 years.
  • Capital concentration risk declined in many indices, as did index efficiency.
  • Meanwhile correlation of returns increased, according to the Intech Equity Market Stress Monitor.
  • As we enter the second quarter, the risk metrics tracked by the Intech Equity Market Stress Monitor show that global and U.S. equity markets exhibit the least amount of risk relative to other segments.

Genuine Scores for the top 3 stocks

  • Janus Henderson, 77
  • Aviva, 77
  • BlueScope Steel, 76

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All the best,
Alister and the Genuine Impact Team

p.s. all Genuine Scores are accurate as of the 23rd of April