Why Anthony Bolton Is Still Bullish

Having given some space recently to the views of Neil Woodford, it is only fair to give here the latest contrasting comments from Anthony Bolton, Fidelity's star stockpicker, who while retired from active day to day fund management continues to play an active role in the group's investment strategy. Regular readers will know that I am the author of Investing With Anthony Bolton, and that he is one of the professionals I interview regularly. These quotes are from the Sunday Times at the weekend.

Earlier this year, investors were about as negative as I’ve seen them in my 38 years in the business. As markets have rallied strongly from their March lows, sentiment has started to improve but investors are not yet too optimistic.
I think we are in the first stage of a bull market that should last a couple of years and, therefore, it is still not too late to invest. A low-growth, low-interest rate environment should be good for equities as investors seek higher returns than they can obtain on cash.

In this climate, investors should look to companies that have the ability to grow organically, as opposed to being dependent on strong economic growth. Companies that can grow faster than the overall market will be rewarded. As well as these, I would include technology and financial stocks, even though the recent financial crisis has been the worst of the six banking crises I have seen in my career.

One of the things I do at turning points in the market is look at historical patterns. I have learnt that the best time to own financials is normally during the first two years coming out of a crisis. When they led the downturn, they have also led the upturn. This time has been no different. While increased regulation poses a risk, most companies evolve and adapt to cope with these changes.

Consumer stocks that follow the business cycle, such as general retailers and value stocks, also show a good record of leading most market recoveries but I would be inclined to shift from these more cyclical areas into growth stocks over the medium term. As growth in the West will be so sluggish, I expect greater opportunities to be found in Asian markets with good domestic demand, where growth should be higher.

Chinese stock markets have been leading the way and, although they need to consolidate, the long-term picture remains very good. I’m less keen on emerging markets that are very dependent on commodities or exports. Commodity and industrial shares were the stars of the last bull market and, despite leading the recovery this year, I don’t think they are going to do so well from here.

One thing not worth focusing too much attention on at market turning points is the economic outlook. If you wait for all the economic indicators to turn positive, you are likely to miss a significant part of the bull market. Recent months have shown that only too well.

My comment: We are in one of those market periods where shares are not obviously or outrageously cheap, but nor are they so overvalued that they could not go higher. Bull markets tend to run longer than the current one, as Anthony Bolton says. Neil Woodford's stance, that the balance of risk is now on the downside, is closer to that of the the classic value investor - the better way to long term, but not necessarily right for those with a shorter time horizon.