Why Auscap has gone from 7% cash to fully invested (and where that money has been deployed)
Is there value in the stock market today? It’s a broad and tricky question to answer, given the market comprises more than 2,000 individual companies. One measure of value is the cyclically adjusted price-to-earnings ratio (CAPE). By this metric, Tim Carleton from Auscap Asset Management says the local market looks reasonable value compared to other markets.
“As we sit here today, if you look at cyclically adjusted earnings and how they represent value, we’re sitting below the 40-year average.”
The ASX200 has experienced a ~10 per cent sell-off from the recent highs in February to the low in late October as rising bond yields forced investors to adjust their valuations. According to Carleton, the result is that value has emerged in sectors of the ASX that benefited from the low-interest rates environment, such as healthcare, infrastructure and technology. Carleton explains that his fund was holding as much as 7% cash but is now fully invested due to the compelling valuations the recent sell-off created.
In the full interview, Carleton discusses why Australian equities look reasonable value, his long-term view on lithium and the earnings outlook for Resmed.
Watch the full interview here.
