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Lowes Wealth Management targets “best value companies in the world”

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Beijing-based fund manager Lowes Wealth Management has announced a programme of stock acquisition to exploit opportunities thrown up by the global downturn.

Beijing-based fund manager Lowes Wealth Management has announced a programme of stock acquisition to exploit opportunities thrown up by the global downturn.

LWM, which recently launched the Elite East-West Value Fund, says its strategy of investing in what it considers to be ‘the 25-35 best value companies in the world’ will reward investors equipped with a long-term investment horizon.

‘We invest solely on the basis of classical value principles, in companies strong in tangible assets that operate with low levels of debt,’ says fund manager Justin Lowes.

‘We moved 90 per cent of the funds we manage into cash in the summer of 2008 and thereby protected our clients from the worst of the market falls. We are now seeing opportunities to carefully and gradually move back into the market, one stock at a time, and believe that opportunities are now presenting themselves which will, in the future, be seen as once-in-a-lifetime investment windows.

‘The key is to invest in companies that are not in danger of capitulation should credit continue to be hard to come by, whose products and services will be in demand even if the global economy does take an additional downwards lurch.

‘A good example would be firms operating in sustainable markets, such as those linked to Asian infrastructure development and oil. The continuing development of the likes of China and India will continue to provide support in these areas.’

A longer term investment horizon is essential, says Lowes, as the US and UK/Euro-zone recessions are unlikely to be short-lived.

‘Consider first the discrepancy between debt and equity markets,’ he says. ‘Spreads are suggesting that defaults on corporate debt are likely to be at 1930s levels. This is very much at odds with the message from equity markets.

‘And, along with the still falling property markets and rising unemployment, there is almost certainly more bad news to emerge in terms of bad debt in the core US loans market.

‘Here we are still seeing a huge amount of sub prime, Alt-A and even prime mortgage debt that is going to sour. On top of this, add massive amounts of now unsecured home-equity lines of credit, car loans, student loans and credit card debt.

‘Credit card debt in the US alone tops USD1trn, of which around USD250bn may well be written off. Remember that much of this debt was securitised and sold far and wide, so this is just not a US problem.’

And, continues Lowes, the ‘sheer amount’ of deleveraging that is required by banks, hedge funds, governments and individuals is likely to put continued pressure on asset prices.

‘We now see the bursting of two bubbles. A near decade long housing boom that ranks as the biggest asset bubble in history, combined with the bursting of a consumer credit bubble that began to inflate in the early 1980s under Reagan and Thatcher. The seeds of current market distress were long in the making. It is unlikely that a fundamental resolution of such entrenched issues can be achieved in such a short period of time.

‘The UK looks particularly troubled. Massive levels of consumer debt, the ongoing impact of the collapse of the UK housing market and the sheer size of the financial services market as a proportion of the UK economy levels all mean that the UK is likely to be particularly badly hit,’ he said.

But, despite the gloomy picture in the short term, Lowes is ‘tremendously optimistic’ of the longer-term investment scenario.

 ‘The question should not be ‘by investing today, will I earn good returns in six to 12 months?’ The question should be, by buying into the markets at this time, am I likely to lay the foundation for superb returns over the next three to five years and beyond?’ And the answer to this question, we believe, is an unequivocal yes.’

LVM’s fund is suitable for investment for Isas, Sipps Ssass and regular savers with a minimum investment level of GDP5,000 for lump sums or GDP100 per month.

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