Nelson Yu:
Headlines might suggest that there’s a lot of risk in the world, but for a long-term investor, there’s also a lot of opportunity. [Here are] five things that you can think about.
First, capital discipline is going to be so important. The cost of capital is rising. Already what we’ve seen is that less than half the companies are able to generate returns above that cost of capital. You need to find companies that can reinvest at profitable rates.
AI is another great opportunity. So far, we’ve only seen the enablers of AI make big returns in the equity markets. [There are] so many beneficiaries from AI in terms of the productivity they can drive. We need to find companies that can properly deploy their technology.
Supply chain reconfiguration is another big theme. Deglobalization leads us to look for more supply chain security and also onshore manufacturing. That’s going to require a lot of capital investment in the future.
Another opportunity is looking at the enablers of energy transition. There’s a demand for long-term reinvestment in our energy infrastructure. We need to find companies that can build out the energy grid, that can innovate in resource efficiency and provide electrification to unlock growth demands for the world.
And finally, remember the regional reform stories. Look at what’s happening in Japan. They’re going through a corporate reform to raise the return on invested capital across companies. That’s having an upward effect on the quality of companies that you can invest in Japan. In Europe, you’ve also got fiscal stimulus based off the long underinvestment that those countries have provided. That has actually driven equity markets higher, but we think that this could be a long-term trend in economic growth.
Five Great Themes for Long-Term Equity Investors
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The views expressed herein do not constitute research, investment advice or trade recommendations, do not necessarily represent the views of all AB portfolio-management teams and are subject to change over time.
Nelson Yu is a Senior Vice President, Head of Equities and a member of the firm’s Operating Committee. As Head of Equities, he is responsible for the management and strategic growth of AB’s equities business and investment decisions across the department. Since 1993, Yu has experience generating investment success in global equity markets by joining fundamental research with rigorous quantitative methods. He joined AB in 1997 as a programmer and analyst, and served as head of Quantitative Equity Research from 2014–2021. Since 2017, Yu also served as head of Multi-Style Core Equity strategies, with over $10 billion in assets. Most recently, he was CIO of Equities Investment Sciences and Insights, which brings together resources across Data Science, Quantitative Research, Advisory Services, Risk and Global Execution to deliver differentiated capabilities and insights to AB’s equities investment platform. Prior to joining AB, Yu was a supervising consultant at Grant Thornton. He holds a BSE in systems engineering from the University of Pennsylvania and a BS in Economics from the Wharton School at the University of Pennsylvania. Yu is a CFA charterholder. Location: New York