10.17.2011

Seeing Through Volatility

10.17.2011
Terry Flanagan

Eagle Asset Management aims to soar through fourth quarter by actively looking for value, despite volatility.

Institutional fund manager, Eagle Asset Management, with approximately 17 billion under management, is bullish that active investing can pave the way through current market volatility.

“ ‘Magic’ solutions do not exist, so successful investors will need to maintain a focus on the capabilities of individual companies–as well as a reasonable investment horizon– to see signal through current macro-economic noise,” said Cooper Abbott, head of investments at Eagle Asset Management. “Such an active approach can lead to significant value realization given current volatility.”

Navigating through macroeconomic turmoil, will be undoubtedly challenging going into the fourth quarter of 2011 and early 2012. The key broad based issues will remain: lower estimates of domestic growth, the ongoing financial crisis in Europe–including fears of a 2008 Lehman Brothers-style event– and questions about China’s economic slowdown, according to Abbott. Furthermore, market participants may feel great uncertainty above pending moves from policy makers.

“Surrounding these elements is skepticism of political leadership and an impatience for a quick and painless recovery,” Abbott said, highlighting the importance of Eagle’s methodical investment approach.

“As fundamentally oriented, active stock-pickers we are able to invest on a company by company basis. As such, our companies and our portfolios have the potential to grow at rates quite different than those of their regional or global GDPs.”

The firm’s equity focus has been centered on “high-quality companies with competitive advantage, strong financial position and improving fundamentals—firms that can survive, improve their pricing, positioning and client depth,” according to Abbott.

“In fixed income, we believe that it is important not to reach for yield. Among corporate bonds we place emphasis on business with predictable cash flows and modest leverage.”

Abbott noted the firm is underweight financials, especially money-center banks due to the macroeconomic uncertainty in the global markets.
Managers currently criticizing growth prospects in the developed markets may be bearish on investing in the U.S., but for Eagle, uncertainty means a retreat to “American companies given their diversity and competitive positioning.”

“In the large cap space, we are seeing very high quality, globally oriented companies with strong financials. These companies can operate anywhere on the planet, typically have deep product lines and in many cases are offering an attractive dividend,” Abbott told Markets Media. “Small Cap companies represent a deep opportunity set to select from: niche companies can develop and maintain competitive advantages, with potential for significant, sustained growth and perhaps acquisition by larger players.”

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