By Philip Haddon | 08:01:00 | 29 July 2009
Veteran global equity manager Beatrice Philippe thinks investors may be surprised by the speed of the economic recovery when it arrives.
‘We think the surprise might be in the third or fourth quarter of this year or the first quarter of next year, when the recovery is stronger than anticipated,’ she says. ‘If there is to be a surprise, I think it is more likely to be that people have underestimated the recovery than the other way around.’
‘There’s a lot of cash around and people are wanting an opportunity to get back in market. I am reasonably optimistic. So far, looking at the Q2 earnings in the US, 80% of those reporting have been better than the market expected. The question is whether this trend will continue in Q3.’
The New York-based CIO and president of Philippe Investment Management (PIM) joined the family firm in the early seventies, and thinks the similarities between then and now are striking.
‘Starting in fund management in 1973 was a sobering experience; the market was down almost every day for two years,’ she said. ‘It was the time of the first oil shock and people were saying it was the end of the US. At that time, my father said that as long as you focus on strong companies that will survive the tough period you will be fine, as prices are ridiculous. This period reminds of that one – you just have to focus on quality companies at attractive prices and buy them for the long term. One just needs solid nerves and patience.’
Philippe’s firm’s funds, including the PIM Global Opportunities fund she co-manages, are currently playing several themes that are connected to emerging market growth.
Energy is the largest theme in that fund, but she is also keen on the prospects for infrastructure development in emerging markets and in the US. She is also looking at how the healthcare space can benefit from the ageing population in the West. Defence and security, scarce resources and global brands are other themes she emphasises.
Her top holdings in the global fund include healthcare firm Roche, which she thinks is currently well positioned to benefit from the swine flu pandemic. Her other largest bets are in mining machinery firm Bucyrus International and energy firm XTO Energy.
Despite being stuck in the doldrums, the US consumer is far from dead and buried, Philippe thinks. ‘US consumers will trade down, but they still just love to consume,’ she says. ‘It might be (budget retailer) Target instead of Tiffany & Co, but they will still consume.’
Although she is optimistic – she says ‘if you are not reasonably optimistic in this business you might as well go and do something else’ – she is disturbed by the re-emergence of excessive bank bonuses.
‘The financial system is stabilising, but I just hope that the banks have learnt their lesson and we don’t go back to where we were,’ she says. ‘The bonuses announced at Goldman Sachs recently looks like they are acting as if nothing has happened. That worries me.’
In the past three years, Philippe’s PIM America fund, which she co-runs with John Conti, has lost 0.2%, while the S&P 500 has lost 22.7%.
The PIM Global Opportunities fund, which she co-manages with Michel Raud, has lost 22.6% in the past three years, while the FTSE World index has fallen 25.7%. In the past six months the fund has returned 15.2%, compared to a 7.8% index rise.

Advertisements