Manager Views

Investing in America

Looking for opportunities in the world's largest economy

Many analysts believe that America’s economic challenges have left US equities under-owned, even by Americans. At some point investors will look at the positives in the US corporate world and confidence will return. And Mackenzie Universal US Blue Chip Class Portfolio Managers Erik Becker and Gus Zinn have positioned the fund to perform well when sentiment shifts, by concentrating the fund in about 50 US companies that they expect could produce long-term earnings above expectations

Roughly half the portfolio is made up of potential market leaders that Becker and Zinn believe could do well because they are positioned in sectors where investors have underestimated future growth opportunities. These include areas such as mobile broadband, consumer credit recovery and demand for heavy duty trucks as American firms begin to replace aging fleets.

The other half of the portfolio consists of stocks selected for company-specific reasons, with an eye for game changers like new products in development, emergence of new management teams or signs of effective cost restructuring – all of which can signal a heightened potential to beat earnings estimates. For example, the fund purchased Amgen, a leader in the biotech space, based on its solid product pipeline, including its new osteoporosis drug Prolia.

Overall, the names in Mackenzie Universal US Blue Chip fund read like the Who’s Who of the US corporate elite, including Apple Inc., Harley-Davidson Inc., CBS Corp., ConocoPhilips and Capital One Financial Corp.

And in general the fund has been positioned since mid-2009 to capitalize on global growth trends that could benefit high-quality US multinationals, who are dominant in the consumer discretionary and industrial sectors.

Many of these firms emerged from the recession even stronger than when they entered it. “Through the financial crisis, many US industrial firms engaged in unprecedented reductions in their labour force, administrative expenses and capital spending,” says Zinn. “The result has been a very powerful profit recovery that has confounded skeptics that focused on the overall sluggish nature of US recovery.”

On the consumer side, both managers are on the lookout for sectors, such as the media space, which is undergoing a sweeping restructuring. They see new distribution models for content being developed that will drive up the price of high-quality content over time, and change the earnings prospects for companies in the group.

While some analysts believe that US retail spending will lag, they believe the consumer is in better shape than many people believe. “We have not bought into the idea of long-term consumer deleveraging,” says Becker. “We believe much of the balance sheet repair for the consumer has already taken place through an increase in the savings rate to 6% from a negative number just a few years ago.”