2022 was by all accounts a bad year for stocks. By the end of the year, the S&P 500 fell by 19% making it the worst year for the S&P 500 since 2008. Despite this, experts remain optimistic for the year ahead of us.
Martin Gilbert, Chairman, Revolut, AssetCo and Toscafund, explores the biggest challenges in stock picking in 2023, what has changed from previous years, his views on controversial stocks and more!
What’s the biggest challenge in stock picking in 2023?
Challenge? I think the good news for stock pickers is that they are back in fashion. Until 2022, markets were dominated by momentum trades – which is mainly why passive funds did so well against many active ones. The volatility we have seen over the past 12 months and the return of real interest rates has meant that significant pools of value have emerged.
The challenge is keeping up with events.
I thought the Chinese markets looked interesting at the start of the year as China emerged from lockdown but since then, the Shanghai index is up 5% and the Hang Seng up 8.5% in just one month. Stock pickers are going to have to stay nimble in these markets.
What has changed substantially from previous years?
As I say, the really big shift we have seen is from a long period where money was essentially free, so that asset backed markets moved relentlessly higher and growth was priced at a huge premium, to a market where there is a genuine cost of capital.
I don’t think we will go back to that era of free money for quite a while.
The issue for our industry is that a lot of professionals have grown up in a world of near zero interest rates and zero inflation, which have been with us for almost a generation. Now they are having to recalibrate to a world where there is a real time cost of money. That adjustment in attitudes is going to take some time.
What are the biggest swings – who now would you say are the best type of stock to look for and why?
Well, the biggest swing in the past year has been from growth stocks to value stocks, as growth premiums have fallen to more sensible levels – and the markets have become rather more aware of the risks that come with growth.
The big question is when should investors move back to growth.
We’ve seen the big growth stocks do very well since the start of the year – Netflix’ shares are up 20%, while Tesla is up 60% after a shocking performance in 2022, but for me, this all feels a little premature. I think there are still pools of real value out there for investors to tap into, especially stocks that will benefit from China’s reopening and the ramp up in infrastructure spending in the US and Europe in areas such as renewable energy and defence.
What is your view on controversial stocks like Tesla and Twitter? Buy hold or sell?
I run fund management businesses, I am not a stock picker, so don’t follow my advice! But that said, I wouldn’t be a buyer of Tesla shares. There is so much more competition entering the EV market that life is only going to get harder for them. On Twitter, there is no market out there since Elon Musk’s takeover, but I certainly wouldn’t pay what he did, which was $54. Perhaps I would pay $20. Perhaps.
Your top stock picking tip for 2023?
As I say, I am not a stock picker. But the teams at Toscafund and AssetCo tell me they are very interested in a range of European midcaps – particularly financials and those with a portfolio of strong consumer brands.
Under the spotlight: Martin Gilbert
Co-founder & CEO of Aberdeen Asset Management 1983-2017.
During this time Aberdeen became one of the world’s leading independent asset managers through a combination of organic growth and strategic acquisitions. In its first year, the business had AuM of £70 million and reported profits before tax of £87, in 2016 the figure was £352 million with AuM at £312 billion.
In 2017, Aberdeen merged with Standard Life to form Standard Life Aberdeen (SLA). Following the merger, Marin was appointed co-Chief Executive Officer, a role he stepped down from in March 2019. He was Vice Chairman of the group from March 2019 until May 2020 when he stepped down from the PLC board. I retired as Chairman of Aberdeen Standard Investments, the asset management business of SLA at the end of September 2020.
Chairman of Revolut Limited, AssetCo and Toscafund.
Also the Senior Independent Director at Glencore plc. In 2011, Martin joined the Board of Sky PLC; in January 2016 was appointed Deputy Chairman and chaired the Board before the Company was acquired by Comcast. Between 1995 and 2013, he was Chairman of FirstGroup, having been a director since it was formed in 1989.
He is also Chairman of The Net Zero Technology Centre in Aberdeen and honorary president of the Aberdeen social care charity, VSA. He is additionally, Chairman of Scottish Golf and a Non-Executive Director of the European Tour.
Martin is a member of the International Advisory Board of British American Business. Previously he chaired the UK's Prudential Regulation Authority’s Practitioner Panel as well as being a member of the International Advisory Panel of the Monetary Authority of Singapore.
In 2015, Martin was ranked by Harvard Business Review 22nd out of over 900 in its list of the world’s top performing CEOs. He was named Personality of the Year at the City AM Awards in 2017 and Asset Management CEO of the Year at the Global Investor Awards the following year. In 2020, he was given the Editor’s Choice Award at the Financial News Asset Management Awards in recognition for my contribution to the industry over 37 years.
Martin holds honorary degrees from the University of Aberdeen, Robert Gordon University and Heriot-Watt University. Also an Adjunct Professor of Finance at Imperial College Business School.
Martin was born in Malaysia and graduated from the University of Aberdeen in 1978 with an MA in accountancy and a LLB in law. After qualifying as a chartered accountant with Deloitte, he joined the investment department of local law firm Brander & Cruickshank, which went on to become Aberdeen Asset Management.
Find out more about IMpower Incorporating FundForum 2023 here >>
