Global markets suffered one of their biggest drops on record in 2020 as a global pandemic forced a step-change in consumer behaviour – but not everyone was a loser.

Businesses like Afterpay, Amazon, Zoom and countless others all benefited immensely from the sudden acceleration in e-commerce and the so-called ‘work-from-home’ revolution.

But Nick Guidera, Portfolio Manager with small and emerging companies fund manager, Eley Griffiths, cautioned not all of these businesses will enjoy continued strength.

“Where you’ve had to be careful in this recovery is making sure you’re not banking on COVID winners being prolific winners beyond a particular cycle,” he told Reach Markets.

“You’ve needed to rotate out of COVID winners into COVID losers over time; what’s been considered ‘defensive’ has changed multiple times over the last 12 to 18 months.”

Mr Guidera noted that both Eley Griffith’s funds are fully invested at present and he and his team managed to trade the recovery “reasonably well”  by following the simple saying ‘don’t fight the fed’ – the generally-accepted idea investors should align their decisions with those of the US Federal Reserve.

Following the outbreak of COVID-19 in the US, the Federal Reserve implemented a raft of policies designed to support the US economy, with many of them serving to increase liquidity in markets – a feature Mr Guidera said was good for asset prices.

This influx is also creating inflation in certain pockets of the economy, he added, as the additional liquidity is enabling companies to invest more and hire new staff.

“As a result, our cyclical bets in the portfolio are significantly larger than what they were 12 months ago. We’re large backers of the commodity complex on the supply and demand fundamentals, he said. 

Even so, Mr Guidera said Eley Griffiths is still looking to selectively add some growth names to its portfolios.

“Should this liquidity start to be withdrawn from the system, you don’t want to be positioned too much one way,” he said.

Mr Guidera will be joining us for ‘The Insider: Meet the Fund Manager’ on Friday 18th of June at 12 pm (AEST) where he will provide his 3 favourite stocks, the dangers in continuing to bet on COVID winners and the market trends he believes will drive prices. This will be followed by an interactive Q&A. Book here.

‘The Insider: Meet the Fund Manager’ is a free webcast series which gives you direct access to prominent fund managers. This session is live and interactive and includes a live Q&A. Spots are limited, so please  book into this session as soon as possible.

Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.

Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.

The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.

Sources:

• Seeking Alpha, Amazon: Price Momentum Will Resume On E-Commerce, Advertising And AWS Strengths
• The Balance, What Is Don’t Fight the Fed?
• Yahoo Finance, Shares in this Australian company grew 740% during Covid-19
• Yahoo Finance, Zoom revenue surges 191%, even as COVID-19 eases grip