Question of the Week

Question of the week – Is it time to buy US shares?

Editorial director of Switzer
Print This Post A A A

Q: Given the massive rebound in the Dow Jones – which hit a record high on Tuesday – should I be adding US shares to my portfolio? What is the outlook and will this rally be sustained?

A: Thank you for your question.

Unlike the Australian stock market, the Dow Jones has now recovered to pre-GFC levels and is rising further. Chad Padowitz is chief investment officer of Wingate Asset Management and only invests in international stocks. He is rather upbeat on the US.

“It’s probably one of the few markets that if it has a very strong recovery in the housing market [it will still not be] overpriced,” he says.

“Whereas in Australia if we have a recovery you still have concerns about a bubble.”

A recovery in housing in the US would underpin growth in employment and would particularly benefit the young, unskilled unemployed, who have been suffering the most.

Other factors supporting US growth include the natural gas revolution, which is finding new sources and new ways to access this resource.

There are risks for the longer-term in the US, and they include the budget deficit and the issues around unfunded liabilities.

Padowitz is exploring the US healthcare sector, which he believes is undervalued due to the uncertainty that Obamacare is causing. Wingate Asset Management likes United Healthcare and Express Scripts in this sector.

“We also like some of the special retail companies like Coach and then Kohl’s,” he says.

The dividend dilemma

Many SMSF investors steer away from international shares because of their perceived lack of dividends and their lack of franking credits.

But Padowitz says the dividends available offshore are a lot higher than they used to be and cautions a blind dividend chase in Australia.

“You can get a more diversified source of dividends offshore than you can get in Australia,” he says.

“There are ways to get a source of income from international shares that competes with Australian income but it’s more diversified and process driven than chasing dividends.”

What that means, is there needs to be more thought given to international stocks and how, and where from, they pay their dividends. We will explore this issue in a future post.

 

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

Also in the Switzer Super Report

Also from this edition

View More Articles