How we're pursuing winners in today's environment
November 15, 2019
American Funds video transcript: “Financial services, biotech highlight global opportunities”
Will McKenna: What are the opportunities, themes, ideas, companies that you and the analyst team you work with are most excited about today — and again, I would caveat this by saying of course these aren't specific investment recommendations — but what are the kinds of things when you guys travel the world that you're getting excited about out there? And some company examples would be great.
Jody Jonsson: Well, as I mentioned before, we talked about people coming into the banking system, for example, and the change that's happening in financial services around the world is very exciting — not only in developing countries where people are coming into the system, but in developed countries where we have kind of an explosion in what's happening in payments. I mentioned already the need for IT service around how banks are changing.
Credit card companies like Mastercard and Visa are really the rails of the system on which a lot of new applications are being laid. And so I think there's quite a bit of interest in those areas and a number of companies there that participate in how all of that is changing. In some places that's disruptive to banks, in other places it somewhat reinforces the incumbency of the banks, but there's a lot of activity in that, so we're spending quite a bit of time on that area. And then also just other financial services such as an AIA, based in Hong Kong, but covers all of Asia with insurance and is rapidly growing in China. [It] has a very advantaged position within China essentially as a local company — not as a foreign company — because of the way its licenses are structured.
Will McKenna: And again, a lot of folks just don't have insurance.
Jody Jonsson: Right. And they’re moving to basic savings products and that sort of thing, basic protection, for the first time. So we think there's still a long, long runway for growth there. In other areas, I would say I personally am a big fan of what I call the pick-and-shovel companies. For example, in health care it can be so difficult to try to predict the winners. I was in some meetings last week with biotech companies. And the meeting in about 30 seconds was over my head in terms of how deep they were into the science.
But I know that every biotech company, every pharmaceutical company, needs to use basically the same sorts of equipment for genetic sequencing or for reagents or all the things that are integral to their discovery process. And so we have companies like a Thermo Fisher, for example, which supplies both governments, academia, and the pharmaceutical and biotech sectors, and is growing rapidly even in China. And even in a time when China was slowing down, they were growing at 20% in China, as China is developing its own health care industry. And then also all the testing around food and water and air quality relies on equipment that they make.
Another company would be Boston Scientific, which is in medical devices. It used to be things like just pacemakers and artificial hips and knees and that sort of thing, but now it's getting much more into interventional medicine, neuro-modular kinds of stimulation. Just a much more innovative, higher value preventive kind of medicine that also grows faster. And so again, it isn't as subject to all the pricing and political pressure as you see around pharmaceuticals and such.
So we're trying to find companies that are a little bit off the radar screen, maybe not right in the target when the politicians get worked up about these very populist issues, but that still have very long runways for growth and innovation.
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