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Basic Materials Stocks are Undervalued, says Miton - YouTube
Channel: Morningstar Europe
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hello and welcome to Morningstar I'm
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Emma wall and joining me today to give
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his three picks for growth is David Jane
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manager of the might and cautious multi
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asset fund hi David good morning what's
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the first pick you'd like to highlight
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today let's talk about materials basic
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materials and basic industries this is
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an area that has broadly been out of
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fashion now forth perhaps 30 years in
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the era of low growth low inflation
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these very carefully intensive
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industries were relatively unpopular if
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we believe we're in a strongly growing
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economy with rising inflation if you've
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got a big block of embedded assets
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perhaps you know paper mill or a
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chemicals plant or so on and so forth
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the value of those hard assets is
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appreciating as inflation comes through
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the demand for your products is growing
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as growth comes through and the returns
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these companies can earn which has
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historically been very low are starting
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now to go up so we find that whole broad
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basic industries area very attractive at
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the moment and there have been a lot of
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talk about basic industries recently
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about steel about commodities these
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concerns for you all do they act in some
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way as tailwinds
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well absolutely they're in many ways
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there are opportunities you know if
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you're looking at a hard steel mills in
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the state say for example clearly those
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have appreciated very very strongly and
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but broadly we don't think Terrace is
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going to be a big issue long term but
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clearly in the short term it's given us
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a bit of a Philip and what's the second
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pick let's talk about South Africa so
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another area that's been very out of
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favour for a very long period of time
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broadly because you know obviously the
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government there was was very poor very
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corrupt we've now introduced at least
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the hope if not the realistic prospect
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of serious reform in in South Africa but
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you're looking at actually what is
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probably the strongest economy in Africa
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with a lot of potentially strong aspects
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to it you've got a growing potential
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consumer base so on and so forth so the
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combination of reform improving
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government balance and a very strong
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consumer sector
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makes South Africa again investor ball
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and again relatively cheap how do versus
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that as a stock market because other
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than Tiger brands I don't think I can
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name a South African company that isn't
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related in some way to the mining
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industry however it's actually and
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that's not the area we bought we owned
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that through our basic materials sector
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but actually if you look at South Africa
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you've got a financial sector which
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relatively large but more attractive to
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us is very much the consumer related
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sectors so you've got a strong retail
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sector generally broadly operating
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across the whole whole of Africa a
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strong media sector and so on a Soviet
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so it's a much deeper economy has just
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been so out of favor and so unlooked at
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now for a decade that people forget you
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know this is the biggest the most
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successful economy in all of Africa and
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what's the third and final pic let's
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talk about agriculture today you know
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agriculture is a long-term theme that we
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found attractive for a very long period
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of time broadly because the basic
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ability of the planet to produce food
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doesn't change because there's only a
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single quantum of farmland but of course
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the demand for food with the growing
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population and increasingly wealthy
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growing population is growing much not
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much faster so companies that are able
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to either improve the productivity of
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agricultural land or are to benefit from
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rising agricultural products prices
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which is worth talking a little bit
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about actually because if you look at
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you know most basic materials their
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prices have been increasing now for four
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or five years as the economy's gone well
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the big lag art is soft commodities
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broadly agricultural products who are
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now starting to see some improvement in
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pricing that of course feeds through to
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for demand for for you know basic
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agricultural supplies such as fertilizer
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but also in terms of agricultural
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machinery and of course one of the more
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attractive areas is agricultural
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technology those those technologies that
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can really improve productivity whether
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it's in in in sort of very directed
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watering systems or seeds or so on and
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so forth
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David thank you very much absolute
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pleasure this is Emma Wolfram
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Morningstar thank you for watching
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