In overvalued markets, Mawer goes back to basics

"Boring but profitable" approach seeks wealth-creating companies that thrive regardless of interest rates or political context.

Yan Barcelo 24 August, 2017 | 5:00PM

Stocks are fully valued, if not overvalued, and the creeping rise in interest rates, all else remaining equal, will only contribute to make stocks more expensive, say two veterans at Mawer Investment Management, who describe their firm's approach as "boring, but profitable."

"Only five or six years ago, we at Mawer could still find stocks that we believed could deliver a 10% to 12% rate of return over the long term," says Jean-Philippe Giguère, institutional portfolio manager at Mawer in Toronto. "Not any more, he adds. Markets are not what they used to be. What we see going forward are 6% to 8% returns for new opportunities that we find."

In the present context of rising interest rates, which constitutes the key risk factor, "it's not obvious that companies will be able to increase profits enough to compensate for the headwinds of higher interest rates and potentially higher equity risk premiums," continues Giguère. "So prices could go down, yet valuations would not necessarily become that much more attractive."

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

About Author

Yan Barcelo  is a veteran financial and economic journalist with more than 30 years of experience, writing for many publications in Toronto and in Montreal, including CPA MagazineLes Affaires and Commerce.

© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies