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  • Focus on High Quality, Dividend Paying Stocks, Magellan Investments' Lam Says

Focus on High Quality, Dividend Paying Stocks, Magellan Investments' Lam Says

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Bloomberg Aug 30 17:30 · 8768 Views

Magellan Investments' Britney Lam says she expects the US Federal Reserve to cut rates by 50 basis points in September. According to Lam, this will lead to a rotation out of AI and growth-driven stocks, and shift the focus towards quality and cash flow. "I'll be looking at things that are more stable and that can pay you a dividend," she tells Bloomberg Television.

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  • 00:00 So you're taking a look at this chart, which obviously shows just how expensive
  • 00:03 the mega caps have been, but also sort of how much they've started to
  • 00:06 kind of
  • 00:07 lag compared to, you know, some of the other kind of stocks within the S&P universe that perhaps haven't
  • 00:12 benefited as much.
  • 00:13 Do you think the rally is
  • 00:15 broadening and, and what else do you like at the moment?
  • 00:19 Oh, absolutely.
  • 00:20 I, I, I do find a very interesting question because we're heading in a few key events.
  • 00:24 I think that would that has been driving this positioning shift
  • 00:27 not just in the US but in Asia as well.
  • 00:30 I think the key one is of course the Fed meeting in September that is either going to be 25 or 50% cut,
  • 00:36 basis points cut.
  • 00:37 I personally go with 50 just because I think they will
  • 00:40 like a FOMO.
  • 00:41 They'd rather do it sooner than later and not be behind the curve.
  • 00:44 So now we're pricing in four cuts this year and five cuts next year.
  • 00:48 So if I just look at it from
  • 00:50 a past experience perspective, again, it's all cycle driven
  • 00:53 usually when the first rate cuts.
  • 00:55 Happens that's when equity markets tend to peak out.
  • 00:58 So
  • 00:59 I do think that there's.
  • 01:00 Should be a rotation out of things that have been leading, which has been AI and growth driven stocks more towards quality, more towards cash flow.
  • 01:08 So I'll be looking at things that are more stable that can pay you a dividend.
  • 01:12 So if I throw in what has happened so far in the China earnings season,
  • 01:16 anything that even shouted a hashback buyback
  • 01:19 has actually seen the share price increase like Mong new a lot yesterday, like JDI
  • 01:24 think things that can show that they can generate cash flow and pay that back to a shareholder,
  • 01:28 those will be rewarded
  • 01:30 from a share price perspective.
  • 01:32 So I think the Fed cycle in terms of head is heading into a rate cut
  • 01:37 that we do need to see cash regenerative businesses
  • 01:40 take over as well.
  • 01:41 In terms of leading the market,
  • 01:43 I guess outperformance.
  • 01:47 Brittany has Japan peaked out a bit early in the early July given of course what the BOJ is doing at the same time.
  • 01:55 Yeah, I think that great unwind trade was, was painful.
  • 01:58 But
  • 01:58 again,
  • 01:59 I think we're, we're so short minded that August recuperated so fast.
  • 02:03 But I, I do believe that on the macro perspective, the thesis has changed.
  • 02:08 So we see that the yen has fallen back below 145.
  • 02:11 I do think that the the rate cut cycle because of the US would have an impact subsequently the relative rate spread.
  • 02:19 So tactically, I'm actually in the near term more positive
  • 02:22 China versus Japan.