Equity Value: profiting from the new market environment
We are currently experiencing a regime change: the market environment is characterised by higher inflation, moderate growth and structurally higher interest rates. The scarcity of the growth factor is therefore diminishing.
Value stocks can benefit from this market environment and from years of underinvestment in many sectors. The latter has led to a shortage of goods that were previously in plentiful supply. As a result, companies with previously low margins now have increasing pricing power. This should pave the way for rising profitability.
Value stocks can be among the beneficiaries of the new capital market regime. They can act as a stabiliser in difficult market phases.
Three questions on Equity Value with Stefan Brugger
Video interview: Stefan Brugger - Senior Portfolio Manager Equities at Union Investment with a focus on Equity Global Value
Good reasons to invest in Equity Global Value with Union Investment
Our investment objective
The objective of our active global value strategy is to generate alpha across different market phases. We therefore invest not only in traditional value companies, but also in "stable, cash flow generating" companies, and vary the weighting of these two types of companies depending on the market phase.
Our investment approach
We invest in companies whose earnings are below their estimated long-term potential in the short term, but which have the potential to improve over a period of typically two to three years.
Longstanding experience
Our Equity Global Value strategy is managed by five senior portfolio managers with an average of 16 years' capital markets experience. The team benefits from a large internal knowledge pool of 257 investment professionals across all asset classes.
Investment philosophy and process
Creating transparency
We have a consistent and transparent investment process. It is structured as a continuous cycle of intensive research, balanced portfolio construction, cost-effective trade execution and independent ex-post control, with risk management integrated into the process.
Active stock selection
Our investment philosophy lies between the two extremes of the market, deep value and high quality intrinsic value. In contrast to deep value investors, we do not only look for a favourable valuation. We also look for a minimum level of quality in our investments and a trigger to realise the upside potential over a medium-term time horizon. Unlike quality-value investors, who buy good companies at a low price, we take into account company-specific earnings cycles. As contrarian investors, we buy when a company is earning less than its long-term potential and sell when earnings are above its long-term potential. This is a very active management approach.
Long-term investment horizon
Our investment approach takes a long-term view, deliberately positioning the portfolio in those companies where we believe the earnings situation is only temporary. Our analysis focuses on how other market participants will view the fair value of our investee companies in a more positive future scenario.
Opportunities and risks of Equity Global Value
Opportunities
- Attractive yield premium
- Diversification effect
- Benefit from the current market environment
Risks
- Market-related price and yield fluctuations and credit risks of individual issuers / counterparties
- Possible increased volatility due to concentration in one investment style
- Fluctuations in exchange rates
Are you interested in equity value? How can we help you?
Your contact person
If you have any questions or require further information, please find your dedicated contact below.
