Rudi’s View: How To Invest Allan’s $300k, Part 2

Rudi's View | 10:00 AM

By Rudi Filapek-Vandyck, Editor

Part Two of this week's Weekly Insights should be read in conjunction with Part One, published on July 24th:
https://fnarena.com/index.php/2024/07/24/rudis-view-how-to-invest-allans-300k/

Dear Allan,

if one is an investor in Quality and Growth, as am I, there is always the danger of a brutal swing in market momentum to the other side where our portfolio has no exposure. The key reason for this happening is usually related to market positioning.

Lots of investors like to 'hide' in the Winners, while plenty of others like to curse the Winners and hide in the Laggards instead. Sometimes the Winners have been on a winning streak for too long and momentum reversal becomes the easiest way forward.

There have been multiple of such attempts over the past ten years or so, and when you're in the midst of it happening it's incredibly frustrating, but it's always good to keep in mind these momentum switches have tended to be temporary phenomenons only. The longest duration I can remember was about four months, late in 2016.

Most investors don't think in the same way as I do, but my view remains that, given the multiple strong megatrends at work in the current era, Growth and Quality are never going to remain out of favour for long. The post-GFC era thus far is proving exactly that.

Now that I've explained the basic pillars underneath my personal views and investment approach, let's take a closer look into what I would do if I were in your position.

Healthcare & All-Weathers

The covid pandemic has thrown the healthcare sector into a multi-year bear market. Who would've thunk it? This is not an Australian phenomenon, it applies all around the globe, with a select group of exceptions like GLP-1 innovators Novo Nordisk and Eli Lilly.

Given the quality of companies in this sector, and ongoing robust growth profiles, this is not a sustainable set-back for this industry and recent price movements suggest the Quality Growth companies in the healthcare sector are coming back to life. This is extremely exciting, if you're a similar enthusiast as I am for this type of companies.

My five cents worth is the Quality in healthcare will start performing first, and the rest might catch up at a delay. A lot will depend on corporate margins and profits, but it's more than feasible, I think, the August reporting season locally might mark the turnaround for the likes of Cochlear ((COH)), CSL ((CSL)) and ResMed ((RMD)).

There's a good argument to be made those share prices are performing already with CSL shares back at $310 and ResMed's above $31. I'd definitely be looking to get on board this new uptrend (if I weren't already). They all have pros and cons and ResMed's threat from GLP-1s is probably the most obvious (I understand not everyone is comfortable with it).