Turning investment logic on its head

With the ‘whites in the eyes’ of inflation clearly visible, investment logic could be “turned on its head”. Kate Howitt, Portfolio Manager at Fidelity International, says it’s important not be underweight commodities stocks, as their “prices could really run ahead” in an inflationary environment.

Key points:

• Inflation has been benign or falling for nearly 40 years. No financial markets professionals who are active now have experienced rising inflation
• Investment logic could be turned on its head. Investors might need to look at stocks they haven’t considered for a long time
• It’s important not to be underweight commodities stocks, as their “prices could really run ahead”
• Property trusts (REITs) face a triple-threat of rising costs, stagnant revenues, and rising bond yields detracting from their valuation
• Niche commodity producers look more attractive than bulk commodities or base metals
• This includes companies such as Lynas Corporation (ASX:LYC), a rare earths producer, and Syrah Resources (ASX:SYR)
• While gold can act as a great hedge against inflation, it’s important to invest in high quality producers. In the full video, Howitt explains why they’re so attracted to two ASX-listed gold producers.

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