In a strategic move, a highly successful global equity fund, the AMP Specialist International Share Fund, is repositioning its investment strategy away from technology stocks in anticipation of a potential slowdown in the sector’s 2023 rally. Despite benefiting from a modest overweight in US tech giants throughout 2023, portfolio manager Trent Loi, based in Sydney, believes that the earnings growth prospects for these tech behemoths are already fully priced in. While he currently has no plans to reduce tech positions, Loi is placing his bets on energy and health shares to be the primary winners in 2024. The fund, valued at A$2.6 billion ($1.7 billion), has demonstrated impressive growth of 18% in 2023, surpassing 97% of its peers, as reported by Bloomberg.
According to Loi, under the “best-case scenario” for 2024, tech stocks are expected to plateau. He suggests that they may not play as significant a role in driving returns next year, signaling a potential market rotation.
Despite the recent shift in the Federal Reserve’s stance towards policy easing, Loi remains steadfast in his outlook. He contends that optimism regarding potential rate cuts has already been factored into the valuations of major tech shares. Any further multiple expansion, he argues, would necessitate substantial changes to company fundamentals.
The fund currently holds positions in the “Magnificent Seven” tech stocks, including Meta Platforms Inc., the owner of Facebook, which has seen a remarkable 187% increase in value this year. While maintaining significant positions in Microsoft Corp. and Nvidia Corp., Loi is increasingly optimistic about the prospects of energy stocks.
Loi foresees a positive performance for energy stocks, citing anticipated gains in oil prices due to a lack of planned pipeline projects and increased deal activity. The fund’s portfolio includes shares in Inpex Corp, TotalEnergies SE, Exxon Mobil Corp, and Shell Plc.
Despite concerns about excess supplies affecting oil markets, Loi believes that supply constraints could emerge in the future. Environmental challenges have made it difficult to develop new energy projects, and with no significant pipelines expected to come online in the next decade, stockpiles may be under pressure, potentially boosting the price of the commodity.
In addition to energy, the fund expresses a favorable outlook for health shares, particularly in the weight-loss sector. Loi holds positions in Novo Nordisk A/S and Eli Lilly & Co., citing reasonable valuations and solid earnings outlooks for pharmaceutical companies.
