MGP’s strategy: diversification, fixed income and quality companies

First quarter results have been better than expected in both Europe and the United States. The banking sector for one has continued showing good growth, driven by higher rates for a longer period of time that benefit its interest margin.

The surprise came this time from the market, which didn’t react positively. “Investors are expecting better results than this time a year ago,” explains Javier de Berenguer, investment manager and fund selector at MAPFRE Gestión Patrimonial.

However, there is still room to rise further, especially in Europe, where valuations have remained low for some time. “In the macroeconomic aspect, there have been sufficient improvements for investors to consider increasing their positioning in European companies, as long as there is nothing on the economic or geopolitical front to spook them,” he said.

In the United States, the biggest unknown at the moment is what way the Federal Reserve (Fed) will move with regards to rates. April macro data and Fed chairman Jerome Powell’s messaging put paid to rate hikes, but the argument to cut them didn’t hold up either.

De Berenguer believes that there are two meetings in which we could see rate cuts: September and December, although inflation should be closer to the 2% target for that to happen. "If the economy slows down in September and inflation remains above 3%, we don’t believe there are sufficient arguments for a cut. If it does happen, it's probably going to be not so much for monetary policy reasons, but for other reasons," he added.

In this uncertain context, the fund manager recommends adopting a captive investment strategy based on portfolio diversification, commitment to quality companies and fixed income in the case of more moderate profiles. “Right now, it's a profitable asset class and the rate cycle is also over, which favors profiles with medium or short duration,” he says.

Warren Buffett reduces his investment in Apple

At the annual Berkshire Hathaway meeting held last Saturday, Warren Buffett went through the reasons why he had decided to reduce his investment in Apple between January and March. The Sage of Omaha cited poor sales figures from China, anti-monopoly fines and the cancelation of some projects. Buffett did however affirm that Apple remained BH’s largest single investment.

De Berenguer noted that other U.S. companies, such as Nike, have also been affected by the comparatively poor performance of the Chinese market, so he doesn’t believe the move by Berkshire to reduce its exposure to Apple to a bad move.