January 11, 2013
Fund Update
April 2015
US Equity Market Update
Transcript from a video filmed 10 April 2015
Grant Bowers
Portfolio Manager
Franklin US Opportunities Fund
What’s your outlook for the US market?
When we think about our outlook for the US equity market in
2015, we continue to be positive, believing that the two pillars of
the US economy – the consumer and the enterprise – remain
very strong. We see valuations as being fair and earnings
growth continuing to move forward at a modest pace in a
reasonable economic growth environment. We think that the low
inflationary, low interest rate environment provides an excellent
backdrop for US equities to continue to perform well.
US companies are cash rich – how will they look to use that
money?
The strong earnings and cash flow that we have seen come out
of many US companies, has resulted in record levels of cash on
the balance sheets. We continue to see three main areas where
corporations would put this cash to work: continue dividend
increases and share buybacks, ongoing investment in capex as
well as R&D, and lastly, and probably the biggest, most
meaningful impact we have seen recently, the ongoing M&A
that we see in the market. We have seen record levels of M&A
in the market in the last two years and we believe that 2015 will
continue to see high levels of mergers and acquisitions going
forward.
What’s your view on the US energy sector?
The vast discoveries of shale, gas and oil in the US has really
transformed the US energy market. We see this as being a
continuing large secular growth trend in the years ahead,
despite the recent weakness and volatility we have seen in
global oil prices. Many US and North American producers of gas
and oil, operating in the shale regions continue to show strong
growth in production, have low cost of production and have
strong financials.
Could you discuss opportunities in healthcare?
The healthcare sector continues to be an area of innovation.
When we look at the healthcare sector fundamentally, we see
significant drivers of demand not just in the US, but globally.
From aging demographics, to new drugs and R&D continuing to
innovate
discoveries
as
well
as
cures
and
When we think about our outlook for the US equity
market in 2015, we continue to be positive, believing
that the two pillars of the US economy – the
consumer and the enterprise – remain very strong.
treatments for many diseases. We see not just the
pharmaceutical and biotech space as being an attractive area
for investment, but also the services area as well.
Why is an active investment approach important for US
equities?
The question of passive or active investing is one that we think
will continue. We believe that an active approach to investing
that utilises disciplined fundamental analysis to build a portfolio
of high-quality US growth equities from the bottom up, will
continue to add value and alpha to investors’ portfolios over a
full market cycle.
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