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Investors dump safe stocks for innovation

Simone Ziaziaris  |  31 Jan 2018Text size  Decrease  Increase  |  
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SYDNEY - [AAP] Investors are steering away from safe stocks and are turning to more glamorous options such as tech and lithium stocks which are centred around innovation, an investment director at Bennelong Asset Equity Partners says.

Julian Beaumont believes investors have, over the past year, become deterred from blue chip stocks like Telstra (ASX: TLS) and the big banks due to faults and bad returns and are instead choosing "exciting" companies which have the potential to grow.

"Coming out of the Global Financial Crisis (GFC) people were pretty scared and were always wondering what was around the corner in terms of a market brush-off so they went to what they knew--the warm and cuddly blue-chip stocks," Mr Beaumont told AAP.

"Now investors are getting a little bit more comfortable and investing into true equities that are a bit more exciting like some of the tech sector and some of those smaller names."

The investment director expects the market to grow by about five to six per cent over the next 12 months and said there are promising opportunities in a number of successful Australian exporters and global businesses such as Treasury Wine Estates (ASX: TWE), CSL Limited (ASX: CSL) and Aristocrat Leisure (ASX: ALL).

He said the companies which are doing well are those that are expanding globally and acquiring businesses, with innovation one of the biggest attractions to investors.

"There are companies on the Australian market that really stand for something in terms of a brand, product and innovation and that really play well in the offshore markets," he said.

"The reason why people are going for these bright lights is because they are exciting and there are potentially big returns, but it is also very hard to disprove in the short term similarly to Bitcoin and with a number of these pre-revenue concept stocks."

Despite this, Mr Beaumont said some investors are still picking companies for the dividend rather than the business model.

He said an example is Telstra, which pays consistent dividends, but its share price fell almost 29 per cent in 2017, and it announced a cut in dividends late last year.

Mr Beaumont said this may encourage people to focus on stocks that will perform better, or even start considering fixed rate assets once interest rates start rising.

In regards to the upcoming earnings season, he said companies are also becoming more realistic, having previously been too optimistic only to let investors down.

He said with that in mind, the upcoming earnings season should be "generally positive".

"For example, people have been pretty pessimistic on retail ... so the expectations will be low but the numbers will do reasonably well."

"I think people feel reasonably well at the moment."

 

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© 2021 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

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