Interview: "Tech and renewable energy sector: Winning the race"
Mike Judith, Head of International Sales at DNB AM, about investment opportunities in the new year and challenges surrounding ESG ratings for companies.
Blog Editors: This is the end of a difficult year for investors. What could 2023 have to offer?
Judith: We believe that the stock market still has a few rough phases to master. So far, the downturn in equities has been primarily due to a combination of different multipliers, as inflation has been higher than expected and central banks have been aggressively raising interest rates. The next downturn could be triggered by lower earnings estimates due to weaker sales and margin compression. It is not yet possible to say when the bottom will be reached. Conclusion: It will probably become more uncomfortable; investors should prepare themselves for this.
Blog Editors: In which sectors does DNB identify positive opportunities?
Judith: Once the market has reached the bottom, procyclical sectors should do well. Here, we are looking at secondary stocks after their record underperformance over the last twelve months. In addition, consumer cyclicals should also benefit as inflation declines. This sector also performed very poorly in 2022. The same is true for growth stocks, where a significant portion of expected earnings may lie in the future and which have come under heavy pressure due to their sensitivity to higher interest rates. Among growth stocks, we would highlight the tech and renewables sector, which is still benefiting from a strong structural tailwind. We have already taken advantage of the significant setbacks in Bigtech shares or green "pure plays" to selectively enter the market. Finally, even if it may seem trite to some, the Nordic story is still true. It stands for stability, which has just been proven in the course of the Corona pandemic." Norway and Sweden are the most important economies in the far north. The latter country took a special path during the Covid crisis and refrained from broad-based lockdowns, which supported the economy. Norway, on the other hand, has massive amounts of oil and gas, which of course proves to be a trump card in the current crisis. Those interested in the Nordic story could take a closer look at the DNB Fund Nordic Small Cap. Large positions here include THQ Nordic, Bayn Group and Toadman Interactive.
Blog Editors: Some see bonds making a comeback. What do you think?