High barriers to entry can fend off disruptors, Trimark manager says

Michael Hatcher looks for stocks that have been mistakenly discounted.

Sonita Horvitch 16 May, 2018 | 5:00PM

Michael Hatcher, head of global equities and director of research at Trimark Investments, says that given that the equity market is no longer cheap, one strategy is to look for companies that have been erroneously priced because of investor concern about disruption from new technology.

"It is necessary to assess the specific business of each company to evaluate its vulnerability," says Hatcher, a value manager. "The equity market is taking a broad-brush approach regarding the potential challenges posed by the major tech companies to a variety of sectors, he says. "Yet there are high barriers to entry in the case of some individual businesses that are caught up in this general concern." These businesses "have proprietary products/services and an established clientele." The equity market, in taking these stocks down, has overlooked this, he notes.

There is no doubt, says Hatcher, that the bull market in equities is "getting longer in the tooth and valuations are up there." Following the 2008 global financial crisis, the equity market rebounded in early 2009 and has gone up since then, he says. "This has been fuelled by both the gradual global economic recovery and historically low interest rates."

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Alphabet Inc A1,386.32 USD-2.36
Alphabet Inc Class C1,388.45 USD-2.33
Amazon.com Inc1,972.74 USD-1.82
Analog Devices Inc114.66 USD-2.30
British American Tobacco PLC ADR41.05 USD-1.58
Microsoft Corp168.07 USD-1.65
Nielsen Holdings PLC20.42 USD-4.49
Philip Morris International Inc85.00 USD-0.67
Texas Instruments Inc118.38 USD-2.52
W.W. Grainger Inc284.79 USD-3.80

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Sonita Horvitch

Sonita Horvitch