Construction, growing energy production in the U.S., cutting-edge technology, the changing health-care landscape, and increasing merger-and-acquisition activity are likely to provide investment opportunities during 2013, according to a white paper from The Boston Company Asset Management, the Boston-based equities investor for BNY Mellon.
In the paper, “Investment Themes for 2013,” The Boston Company’s U.S. Small Cap Growth team concludes that investment opportunities will exist despite the continuing low-return environment. “In a low-interest rate environment, investors likely will be willing to pay for companies that can deliver growth,” according to the paper.
Beneficiaries of the low rates will be the housing industry, as well as the construction industry across residential and non-residential markets, the report said. On the other hand, the report said banks will continue to feel pressure from low rates that have compressed net interest margins.
On energy, The Boston Company pointed to advances in drilling technology that have led to increases in oil and natural gas production.
“We are investing in companies that benefit from the growing volume of hydrocarbon being extracted in the U.S. but are looking to avoid those that would be adversely affected if commodity prices moderate over time,” says B. Randall Watts Jr., lead portfolio manager for the Small Cap Growth team. “We like the companies that supply equipment and services to this industry, such as pipelines, processing plants and storage.”
In technology, The Boston Company said it favors companies that help carriers improve wireless service and facilitate offerings accessed through smartphones. In health care, The Boston Company expects to find opportunities in biotech, specialty pharmaceuticals, Medicaid managed care and selected health-care services.
Merger-and-acquisition activities, which The Boston Company expects to accelerate in 2013, could provide opportunities for investors, the report said. “As uncertainties surrounding the U.S. elections and fiscal cliff dissipate and the Euro zone makes headway in resolving its debt crisis, companies may become more confident about putting their capital to work,” the report said.
Watts adds: “With continuing low interest rates, there is less incentive for companies to hoard cash. So companies with healthy balance sheets are more likely to acquire market share, talent, intellectual property and new products.”