The strong Australian dollar means that anyone buying international shares at the moment is getting them at a discount, head of Wingate Asset Management Mr Chad Padowitz said today.
“While those who have held international investments for a while have seen foreign exchange work against their investment returns, it works in favour of any new long-term international investments being made now.
“Like any other overseas purchase at the moment – whether it is consumer goods or international travel – the strong Australian dollar brings the price down,” Mr Padowitz said.
He added that, as well as the strong Australian dollar, there is another benefit in investing in international shares at the moment.
“Because the present market rally in overseas markets is predominantly not in quality stocks, such stocks are still undervalued.
“This, coupled with the strong Australian dollar, effectively gives a double discount opportunity in blue chip international equities.
“The rally has favoured weaker, more leveraged companies. According to the Russell 2000 Index, shares with a price below $5 have returned 147 percent on average this financial year to date, compared with negative 61 percent last financial year.
“In comparison, shares priced above $5, such as those Wingate typically invests in, have returned just 23 percent this financial year, while returning negative 29% percent last year. This suggests that shares below $5 had done most of the lifting and shows that the rally has been a risk rally rather than a quality one.”
Mr Padowitz said Wingate believes investors should take advantage of the current strength in the Australian dollar now as it is not sustainable.
“The argument that ‘this time it’s different’ doesn’t really hold water,” he said.
“It’s a refrain we’ve heard many times before, even when the Australian dollar went down to half the value of the greenback in the 1990s.
The Australian dollar is benefiting from an inverse perfect storm. However, while it lasts, Australian investors should take advantage of the opportunity to buy foreign assets,” he said.
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Wingate Asset Management is a joint venture with Australian Unity Investments offering international investments through the AUI Wingate Global Equity Income Fund. It has a large-company, value-based, investment philosophy and an investment process that seeks to combine long term capital growth with ongoing income.
Wingate invests conservatively in a concentrated portfolio of high quality companies from around the world. It identifies stocks offering fundamental value and only invests in companies with high cash flows, strong balance sheets and large market capitalisations. Wingate avoids ‘blue sky’ sectors such as biotechnology, high-end technology and exploration.
This press release is for general information only and has been prepared without taking into account any person’s specific investment objectives, financial situation or particular needs. Australian Unity Funds Management Limited ABN 60 071 497 115, AFS Licence No 234454 is the Responsible Entity of the AUI Wingate Global Equity Income Fund, applications for an investment in the Fund can only be made using the application form in the current a PDS, a copy is available by calling 1800 649 033 or visiting australianunityinvestments.com.au