Domestic Equity—Growth | February 2013
- Companies with strong and sustainable growth have been trading at compelling valuations
An uncertain and low interest rate market environment has presented unique opportunities for investors utilizing a multi-factor approach for evaluating investments rather than relying on a singular view of risk-to-reward in the context of dividend yield. Typically, investors have paid more for high-growth stocks (those companies with estimated earnings-per-share growth rates of greater than 15%) relative to other types of stocks, notably companies that offered a dividend yield higher than 3%. Since 2008, however, that valuation relationship between high-growth and higher-dividend-yielding stocks has materially changed as investors have increasingly preferred income-producing investments. As a result, many companies with sustainable and robust growth potential are now available to investors at valuation levels near the lower end of historic ranges.
Emerging Markets Equity | September 2012
- Chinese economic slowdown strengthens the case for consumer-oriented sectors within the country
In the past, China has relied on two main engines for gross domestic product (GDP) growth: exports and real estate. Looking ahead, we see far better growth prospects in stocks that benefit from domestic consumption as the Chinese spend more on discretionary items. Retail spending has risen, and China has created one of the world’s major gambling regions in Macau, a former Portuguese colony that is the only place in China where gambling is legal. The emerging Chinese consumer is a long-term trend that we believe is gathering momentum and should reward patient investors.
Municipal Fixed Income | August 2012
- Look beyond the headlines: Municipal bankruptcies may present opportunities for those who do their credit research
Challenging times can present opportunities for investors backed by a strong research team. This article provides a case study of the San Bernardino City’s $211 million debt outstanding and explains the differences between the various types of debt held by San Bernardino City in terms of how it was or was not protected from bankruptcy. We also note there was $2.8 billion of debt with “San Bernardino” in its name, such as the county or school district, that was not part of the City of San Bernardino and not subject to its bankruptcy, but was an opportunity for a savvy investor to benefit from indiscriminate pricing.
Domestic Fixed Income | June 2012
- BB-rated and B-rated short-term high yield continues to offer opportunities for compelling risk-adjusted returns
Compared to high yield bonds the shorter maturity profile and generally higher credit quality of the short-term high yield market helps reduce price adjustments from negative shifts in credit spreads. In our view, investors who are looking for more income than the Treasury and investment grade markets offer, but who want to minimize duration risk and avoid exposure to the more volatile parts of high yield should consider investing in the short-term high yield market.
Core Equity | April 2012
- The cable industry continues to offer undervalued opportunities for patient investors
Despite diminishing growth in channel subscriptions, cable companies have been able to generate strong revenue growth by expanding their subscriptions to broadband internet services, which have higher margins than video services. We believe that the market has recently overestimated the negative effect that the stagnation in video subscriptions will have on cable company earnings and that specific stocks within the cable industry present some compelling long-term value opportunities.
Domestic Fixed Income | March 2012
- Volatility in the core bond markets offers opportunities to collect excess returns
Amplified volatility in the core bond markets has actually created a favorable environment for collecting excess returns in recent months. In our opinion, investors with expertise in performing bottom-up fundamental analysis and the ability to transact quickly on their information should continue to see similar opportunities to capture excess returns in 2012.
Fundamental Growth Equity | December 2011
- In a challenging economy, innovative growth companies have a distinct edge
We believe that some of the most successful growth companies will be those that can drive organic sales growth through innovation. By selectively favoring such companies, investors may be well positioned to navigate the period ahead.
International Fixed Income | October 2011
- Smaller economies around the world continue to show promise while older, developed nations languish
Strategies for investing in the current global bond markets are best served, in our view, by continuing to underweight the bond markets of the older economies (U.S., U.K., eurozone, and Japan) in favor of overweight exposures to the smaller, healthier economies with lower deficits.
International Equity | October 2011
- China's developing consumer market may offer more opportunity than its banking sectors
As a result of the real estate bubble and large amounts of politically oriented lending, we believe that many Chinese banks have low-quality credit fundamentals. We further believe that better opportunities exist in companies tied to China's developing consumer market, including consumer discretionary and consumer staples firms, as well as any company positioned to take advantage of growing wealth in rural areas.
Municipal Fixed Income | September 2011
- Low levels of municipal bond issuance may provide technical pricing support during the low-yield environment
During 2011, the level of municipal bond issuance has trended below historical averages due to several factors, including political decisions in response to the slow economy and ongoing budget pressures. Considering the low level of municipal supply and the constrained yield environment, fundamental credit research will continue to be a critical factor for identifying the best investment opportunities.
Growth Equity | June 2011
- Rising capital deployment spawns opportunities for investors
Thomas Ognar, CFA, Joseph Eberhardy, CFA, and Bruce Olson, CFA—portfolio managers for the Wells Fargo Advantage Growth Fund—discuss how the recent increases in capital deployment by cash-rich businesses may create attractive investment opportunities across multiple market segments.