Four holdings to be thankful for this Thanksgiving

This Thursday is Thanksgiving and, for the first time in eight years, I’ll be celebrating with my family
in the United States. Thanksgiving often gets a bad rap, especially abroad. But despite its origins,
Thanksgiving – above all else – is a chance to be surrounded by loved ones and good food. And,
unlike the next holiday on the calendar, the kids aren’t distracted by toys and Father Christmas.

For those reasons I’ve always preferred Thanksgiving to Christmas (shock and horror, I know) but
there’s something very warm and fuzzy about forcing those closest to you to go around the table
and say three things you’re thankful for before they stuff their faces.

In the spirit of Thanksgiving and the age-old tradition of “what are you thankful for this year?”, I’ve
asked four Elite Rated managers what they’re most thankful for – in their portfolios, of course!

“Give thanks for a little, and you will find a lot.” — Hausa Proverb

“We are thankful that, as we move towards the end of 2021, the world is in a far better place than it
was a year ago,” says Martin Flood, co-manager of Lazard US Equity Concentrated. “And also,
that this is reflected in the performance of the US equity market. In record time, we have developed
vaccines that remain highly effective despite ongoing mutations in the COVID-19 virus, and we
have successfully vaccinated a substantial portion of the US population.

“The US economy has rebounded at a rapid pace and could exceed pre-pandemic trend GDP
levels in 2022. US consumers remain healthy in our view, with trillions of dollars in excess savings
year-on-year, and job growth accelerating.”

Co-manager Richard Perfect, told me more about the real estate investment trust, AEW UK REIT,
that’s benefited the VT Momentum Diversified Income fund. “At a time when investors are
sometimes forced to choose between income or capital growth, it is very satisfying to have
benefitted from a REIT that has confidently delivered both,” he said.

“We have been holders of AEW UK REIT since its IPO. The shares were undeservedly hit in the
pandemic; despite the REIT benefitting from a strong balance sheet having raised new equity in
February 2020. Throughout lockdown there was strong performance in rent collection. The market
finally caught up with the excellent asset management performance of the team over the course of
2021, delivering a dividend that was yielding over 10% at the start of the year.”

Although energy infrastructure contributed to most of M&G Global Listed Infrastructure’s
performance in 2021, manager Alex Araujo points to digital infrastructure and the fund’s biggest
holding CoreSite. “A data centre company whose shares have gained more than 30% this year,
bucking the trend in an unfavourable environment for interest-rate sensitives,” he said.

“The US company is a long-term beneficiary of the insatiable appetite for data from consumers and
corporates alike, but the fund’s biggest holding has attracted attention more recently in a takeover
from American Tower, another of our holdings. This interest, particularly from private buyers, is a
clear indication in our view that the reliable and growing cashflows from critical infrastructure
assets are going cheap in the stock market.”

Listen to our recent interview with Alex on the Investing on the go podcast

“We are thankful for our investment in Old Dominion Freight Lines, an industry-leading freight and
transportation services business,” said Curt Organt, manager of T. Rowe Price US Smaller
Companies. “Our initial investment was based on an expectation they would gain share in the
smaller format ‘Less than Truckload’ segment of the US shipping market.

“Old Dominion has built great relationships with its employees over time, leading to a more stable
workforce and giving the company a labour advantage over peers. It also has a location advantage
due to the fact it owns its facilities and warehouses rather than renting them. The benefits from
these two advantages have increased significantly over the past two years, as growing e-
commerce activity has pressured industrial property rental prices and ongoing labour shortages
have created meaningful challenges to Old Dominion’s competitors.”

As Martin nicely summed up – and I’m sure many managers across the globe would agree – “We
are thankful that we are in the process of putting COVID-19 behind us, and we are eager put our
rigorous research and stock selection into play to take advantage of the opportunities that the
market offers us in the years to come.”