Ron Shamgar, Head of Australian Equities and portfolio manager for the TAMIM Australia All Cap portfolio, shares his market insights on the latest developments shaping the investment landscape.
The first month of the year has provided investors with a strong start, buoyed by optimism surrounding the incoming Trump administration and its pro-business policies. This sentiment has translated into solid equity performance, particularly in the U.S. markets, where the S&P 500 ended the month on a strong note. Historically, when the index rises by more than 2% in January, the year tends to deliver positive results. Since 1951, such instances have led to an average annual return of 18.4%, with markets finishing higher 88% of the time. If history is any guide, this is an encouraging sign for investors.
Australian Market Outlook
Closer to home, Australian consumer sentiment is showing signs of improvement, though it remains below historical norms. Most economists are forecasting interest rate cuts in either February or March, a move that we believe would be highly supportive of local equity markets. Small and mid-cap stocks, in particular, stand to benefit from a lower rate environment, as cheaper capital fuels business expansion and investor appetite for growth opportunities.
Are Markets Overvalued? A Deeper Look
One question that continues to dominate investor discussions is whether current market valuations are stretched. The U.S. market, particularly the ten largest stocks, does appear to be trading at elevated price-to-earnings (PE) multiples. Drawing parallels to the dot-com boom, the highest-weighted stocks today exhibit high PE ratios similar to those seen during the internet bubble. However, an important distinction is that today’s market leaders generate significantly higher earnings and enjoy strong competitive moats, making them more fundamentally sound than their late-1990s counterparts.
Furthermore, while the ten largest U.S. stocks are trading at elevated valuations, the broader market tells a different story. The remaining 490 stocks in the S&P 500 are trading at PE ratios below the long-term market average, which starkly contrasts with the dot-com era when high valuations were widespread across the index.
A Global Perspective
Looking beyond the U.S., valuation concerns appear less pronounced. Many global markets do not have the same concentration of high-growth technology companies, which has kept their PE ratios in check. Unlike the early 2000s, when global equities also experienced high valuations during the internet boom, today’s overvaluation concerns seem largely confined to a select few U.S. stocks.
This suggests that any potential correction in these high-growth names may not necessarily have broad-based repercussions across global equity markets. Instead, a sector-specific pullback could present opportunities for investors in other areas of the market.
Sector Insights: Opportunities and Risks
Breaking it down by sector, we are seeing particular strength in industrials, energy, and materials. Infrastructure and renewable energy investments continue to attract capital, while the mining sector benefits from sustained demand for commodities.
Technology remains a key driver of global markets, but its high valuations necessitate careful stock selection. While AI and cloud computing companies continue to gain traction, concerns over regulatory scrutiny and market saturation pose risks that investors must navigate.
Financials are another area to watch closely. With potential rate cuts on the horizon, banks may face margin compression, but this could also lead to increased lending activity, benefiting economic growth in the long run.
The TAMIM Takeaway
Now that we are in February, our focus turns to upcoming economic data releases and corporate earnings season, which will provide key insights into market conditions and potential investment opportunities. In our weekly investment newsletter, we provide a detailed commentary on recent updates, reflecting our positioning in this evolving environment.
We look forward to sharing more insights in our next monthly report following the February results season. Until then, we continue to monitor developments closely and remain committed to identifying value in a dynamic market landscape.
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As we enter 2025, the global economy continues to evolve, presenting a mix of challenges and opportunities for investors. While inflationary pressures, geopolitical shifts, and technological advancements shape the financial landscape, they also create avenues for growth across key sectors. Infrastructure, advanced materials, and technology remain at the forefront of economic transformation, offering resilience and potential. Against this backdrop, we highlight three standout companies – CK Hutchison Holdings, Corning Incorporated, and Japan Aviation Electronics that exemplify innovation, diversification, and long-term value. Each presents an attractive opportunity for sophisticated investors looking to enhance their portfolios with a mix of stability and growth.
CK Hutchison Holdings Limited (SEHK: 1)
CK Hutchison Holdings is a Hong Kong-based multinational conglomerate with operations spanning Ports and Related Services, Retail, Infrastructure, and Telecommunications. This strategic diversification provides stable cash flows and exposure to global trade and urban modernisation trends.
The company operates 293 berths across 53 ports in 24 countries, making it a critical player in global trade logistics. Its retail segment includes well-known brands like Watsons and PARKnSHOP, while its infrastructure investments span energy, water, and transportation. Trading at a low price-to-earnings (P/E) ratio of 6.33 and offering a dividend yield of 6.14%, CK Hutchison is undervalued compared to its industrial conglomerate peers. The company’s defensive business segments generate strong cash flows, enabling reinvestment in high-return projects. A prudent debt-to-EBITDA ratio of 5.26 underscores its financial stability.
Recent geopolitical developments suggest a more measured approach to U.S.-China trade relations, reducing the likelihood of extreme tariffs. CK Hutchison’s strategically located port assets stand to benefit from this shift. With its diversified operations, strong fundamentals, and attractive valuation, CK Hutchison offers a compelling investment case for those looking to gain exposure to global trade and infrastructure growth.
Corning Incorporated (NYSE: GLW)
Corning is more than just a materials company, it is a technology leader specialising in advanced glass and optical solutions. Its business spans five key segments: Display Technologies, Optical Communications, Specialty Materials, Environmental Technologies, and Life Sciences.
Corning’s products are integral to enabling next-generation technologies, including fiber optics for AI infrastructure and specialty glass for automotive applications. Its Optical Communications segment is particularly strong, fueled by increasing demand for high-speed fiber networks to support AI data centers and 5G rollouts. The Specialty Materials division supplies cutting-edge glass solutions for mobile devices and automotive technologies.
Despite some challenges in its Display Technologies segment, Corning’s FY2024 revenue is expected to exceed $15 billion, supported by growth in optical connectivity and strategic pricing adjustments. The company has also secured funding under the CHIPS Act, reinforcing its role in advanced manufacturing. Trading at a P/E ratio of 22.35 and offering a 2.25% dividend yield, Corning combines income and growth potential. The company’s consistent share buybacks further enhance shareholder value. As markets recognise its critical role in AI, 5G, and next-gen automotive advancements, Corning presents a strong long-term investment opportunity.
Japan Aviation Electronics Industry Ltd. (TSE: 6807)
Japan Aviation Electronics (JAE) is a leader in high-performance electronic connectors and interface solutions, serving industries such as aerospace, automotive, telecommunications, and factory automation.
JAE’s advanced connector technologies are crucial for industries like EV manufacturing and smart factories. The company’s innovations, including ultra-compact connectors for smartphones and automotive applications, cater to the global trend toward miniaturisation and efficiency. JAE is also active in the aerospace sector, where its motion sensors and fiber optics play a vital role in advanced navigation and stabilisation systems.
Financially, JAE has demonstrated resilience, reporting a return on assets of 4.63% and a return on equity of 7.86% for FY2024. With a manageable debt-to-EBITDA ratio of 1.19, the company is well-positioned for future growth. Trading at a forward P/E ratio of 13.8 and a price-to-book ratio of 1.46, JAE offers an attractive entry point for investors. Its 2.16% dividend yield adds to its appeal, offering both income and growth potential. As industries increasingly adopt advanced electronics, JAE’s expertise positions it as a key enabler of innovation, making it a compelling long-term investment.
The TAMIM Takeaway
The three companies highlighted CK Hutchison Holdings, Corning Incorporated, and Japan Aviation Electronics demonstrate the value of investing in businesses with strong fundamentals, innovative capabilities, and exposure to key global trends. Each operates in sectors poised for sustained growth, making them attractive options for sophisticated investors seeking to diversify their portfolios.
CK Hutchison offers stability and income through its diversified global operations and undervaluation. Corning provides a unique blend of technological leadership and long-term growth in AI and next-gen automotive technologies. JAE delivers cutting-edge solutions for high-growth industries, reinforcing its role as a leader in advanced electronic components.
In an evolving market environment, these companies exemplify how a strategic global investment approach can uncover hidden value and long-term potential. For investors managing their SMSFs or seeking high-conviction investment ideas, these businesses offer a balanced combination of growth, income, and resilience key attributes for success in 2025 and beyond.
At a time when global equity markets have been dominated by one theme, AI, and portfolio risks highly concentrated in Nvidia and its ecosystem, to a dangerous degree, there are many attractive cheaper and technologically advanced companies which are under acknowledged by the stock market. Thai presents a remarkable opportunity for investors who wish to access a diversified portfolio with a resulting lower level of return volatility.
Disclaimer: CK Hutchison Holdings Limited (SEHK: 1), Corning Incorporated (NYSE: GLW) and Japan Aviation Electronics Industry Ltd. (TSE: 6807) are held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
CK Hutchison Holdings is a Hong Kong-based multinational conglomerate with operations spanning Ports and Related Services, Retail, Infrastructure, and Telecommunications. This strategic diversification provides stable cash flows and exposure to global trade and urban modernisation trends.
Corning is more than just a materials company, it is a technology leader specialising in advanced glass and optical solutions. Its business spans five key segments: Display Technologies, Optical Communications, Specialty Materials, Environmental Technologies, and Life Sciences.
Japan Aviation Electronics (JAE) is a leader in high-performance electronic connectors and interface solutions, serving industries such as aerospace, automotive, telecommunications, and factory automation.