Portfolio picks  

Why America is still the land of investment opportunity

One American investment we have given up on is rolling stock manufacturer Wabtec.

While US infrastructure is in dire need of rejuvenation, we feel this company’s decision to merge with GE’s transportation division increases risk for little tangible gain.

We think the pair may struggle to execute the merger well – either way, we feel the risks for Wabtec have increased to the point that we have sold our entire position in the company.

While I was away, the Italian political crisis really kicked off, sending bond yields sinking to lows not seen since December 2017. That led to a discombobulating situation.

Just before leaving for the US I bought gilts as they bobbed around 1.5 per cent, and then it seemed I was hardly back in the office and I was selling them at 1.2 per cent.

We will be sticking to this strategy of buying gilts when they rise to 1.5 per cent and selling when they fall significantly below.

We believe the portfolio protection offered by gilts is eroded when you buy them at very low yields – but we still think they should form part of a well-balanced portfolio in the long term. Just at the right price. 

As for the whole Italian kerfuffle itself, we think this recent drama helpfully sums up why we are cagey about eurozone investments. There are just too many inherent flaws in the European system that will continue to frustrate investors over the coming years.

While we still hold some European investments, they are carefully selected and typically driven by global growth, rather than the health of the region where they are based.

For us, America is still the land of opportunity.

David Coombs is manager of the Rathbones Multi-Asset Portfolio funds