The investment case for North America remains strong, says Alliance Trust
North America continues to present a strong investment case, says Matt Strachan, head of North American Equities, Alliance Trust Investments.
Strachan, who manages Alliance’s North American Equity Fund, says the investment case for North America is strong for several reasons. “I think without doubt the strongest reason for having investments in the US is simply the strength of the companies which are based there. Almost regardless of economic background there is nearly always some company, which can benefit from the circumstances of the moment.
He said: “It’s also an open field in terms of companies coming through, so it has always regenerated a stock of interesting companies faster than any other region that I’ve covered. Some of the smaller mid-cap companies are particularly promising in terms of strong business franchises that have sustainable periods of growth in front of them and high earnings rates on the back of that.
“We will always remain committed to being a stock driven fund in terms of selection and, despite valuations having moved up over the last 6 months or so, we still find that there are plenty of opportunities and attractive valuations and individual circumstances.”
The growth in natural gas production through fracking is a notable development, says Strachan. “This is a technology that has made huge leaps and bounds over the last 10 years and has, in fact, driven down the price of natural gas to a 10-year low. We’re also now seeing the technology advance into the production of oil and natural gas liquids in the US, again something that we think that will continue to progress for a number of years.”
This has a number of benefits, says Strachan. “Obviously, it lowers energy costs for the US and in fact we think, on a non-subsidised basis, the US now has some of the lowest industrial energy costs in the world. It also means that there is a growing supply of cheap feedstock for US chemical companies so, all in all, it provides a very strong background for both increased energy independence in the US and industrial benefits through lower costs and materials.”