Braitling: Beware of the bond proxies

Livewire recently featured a report from Watermark Funds discussing 5 industries at risk of disruption (VIEW LINK) - the report generated lots of interest. Livewire spoke with Justin Braitling, CIO of Watermark Funds, to discuss some of the themes the report raised and how they are translating to his views on Australian equities. He makes the following points 1) Investors have been willing to pay up for companies that are ‘ex-growth’ in order to access income 2) Many of these companies are now mature and are facing both economic and competitive headwinds 3) Domestic industrial companies have fewer growth opportunities compared to those operating in offshore markets 4) There is likely to be a growing divergence in the multiples investors are willing to pay for companies with and without growth opportunities. Braitling says the recent sell off in bond markets could be the beginning of more sustained weakness in companies that are being harvested purely for income. In this interview Braitling explains how he is approaching this changing dynamic.