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US EQUITIES

Catch opportunities in an improving economic context

What are the benefits of US companies?

At BNPP IP we believe that the US provides many exciting opportunities for investors.

The United States: the world’s largest stock market The United States has the largest stock market in the world and represents 58% of the MSCI World Index* (which covers 23 developed markets). Given this market’s enormous size and influence we believe many European investors have traditionally been underinvested in US equities within their portfolios. In addition, our positive outlook for the US economy in 2015 means investors can no longer afford to ignore this market.

Fast American growth For many years, the US economy has shown superior growth compared to other developed countries. The average GDP growth over the past 5 years was 2.18 percent compared to 0.68 percent in the Eurozone (1) and in 2015 this superior growth should continue.

Innovation and re-industrialization Finally, the US leads the world in many business areas, whether innovation, high technology, or corporate productivity. America has undergone a strong re-industrialization phase in the past few years due to the recovery of national oil production thanks to new extraction techniques like fracking.

Why chose BNPP IP’s US stock market funds?

Specialist teams based locally in the US

For these reasons we have carefully chosen specialised teams, based locally in most cases, to manage our comprehensive US fund range. BNP Paribas Investment Partners has around 5 billion euros in assets under management in US equities.

A wide choice of fund styles At BNPP IP we offer many different investment styles for our funds:

  • core
  • value
  • growth
  • high beta
  • high dividend stocks

In addition, we have funds focused on different company sizes (e.g. large, medium or small cap stocks). A particular strength is the exciting area of US small and midcaps where we rank among the top 4 managers (for open-ended funds distributed across Europe).

 

Outlook for the US stock market in 2015

Looking forward, we continue to believe US companies will do well as:

    • In terms of recovery, the US economy remains ahead of other countries bouncing back strongly from the 2008 recession and employment figures have improved significantly. In 2015, GDP growth in the US should be higher than in most developed countries. We forecast 2.7% compared to 1.25% for the Eurozone and 1% for Japan (2). In 2014 GDP growth figures in the second and third quarters were surprisingly high and caught most investors by surprise.

 

    • The rise of the US dollar versus the euro (+13.6% in 2014) has already provided additional returns for euro-based investors and we expect further rises in 2015.

 

  • It is true that equity valuations appear rich, but we believe that earnings growth is strong enough to justify this. This is because during recovery phases, published earnings traditionally beat estimates. So it’s likely that real earnings will continue to surprise on the upside. Secondly, if business momentum accelerates, as we think it will, US corporate earnings growth could be significantly higher than that forecast by financial analysts. According to research (3), the percentage of companies beating analysts’ EPS estimates was typically between 60% and 80% for the US.

 

* Source MSCI as at 31 December, 2014.

(1) Source : Consensus Economics Inc. forecasts as at 8 December 2014

(2) Source : BNPP IP end December 2014.

(3) Source : Nomura from Q1 2010 up to Q3 2014