In his Hi Five Investment Report for 2014, investment manager David Middleton – who heads the financial planning and portfolio construction firm – prefaced his recommendation by alluding to the sharp fall in QBE Insurance shares last month as a reminder that “nothing is for certain”.
“Perhaps to prove that nothing is foolproof, last year we included QBE as a suggestion and up until early December the share price was up by 45 per cent since January,” Mr Middleton said.
“But you don’t know what is unknowable and QBE’s own internal problems caused the share price to go back to where it started the year.
“The moral of the story is that nothing is for certain, but if you do pick investments based on the fundamentals you also protect your downside risk when problems occur.”
Middletons expects further falls in the value of the Aussie dollar at some point in the next five years.
“As well as investing overseas, you can also look to invest in businesses with substantial income from overseas,” he said.
However, Clime Asset Management’s chief investment officer John Abernethy believes a US recovery is overstated and would not benefit Australian companies operating in the United States.
“While recovery in the US is happening, it has neither greatly improved employment levels nor lifted household income,” Mr Abernethy said. “The strengthening US dollar will challenge the recovery, particularly its manufacturing base.
“The flow-on effects for economic activity would be significant and would not benefit Australian companies operating in the US.”
