The healthcare and housing sectors are performing particularly well in America.
“There’s a very strong push on [containing costs] within the U.S. healthcare industry,” says David Hollond, chief investment officer of U.S. growth equity mid- to small-cap at American Century Investments. He manages the Renaissance U.S. Equity Growth Fund.
He adds, “It makes a number of companies rather interesting because they’re seeing accelerating revenues and earnings based on the secular trend that’s taking place—this trend that’s being driven by political forces.”
For instance, Hollond says there’s a group of companies called pharmacy benefit managers, which handles drug benefits for insurance companies.
The efforts of these companies help lower the costs of using drugs for the employer, as well as for the company sponsoring the plan and the insurance provider, he explains. If the government is involved, it also benefits from lowered costs.
Meanwhile, U.S. housing has reached a turning point and prices are improving. This shift began in November 2011.
“For a long time, consumers have wanted to buy new houses but held back,” says Hollond.
He adds, “Even if they were employed and confident about their ability to buy a home, they [didn’t]” because valuations could have dropped three-to-six months after they took the leap, with some prices falling 20%-to-30%.
Now that prices have bottomed, however, pent-up demand is creating a sellers market.
“Since mortgage rates are very low, it’s now cheaper for many people to buy a house than rent an apartment,” says Hollond. “[Also], a housing cycle usually lasts a number of years and we’re only a year or so into [this current one].”
What’s more, if your clients are looking for broad market exposure, he says the U.S. small- and mid-cap space is tied to nearly every market sector.
This makes it unique since most other countries are only heavily affected by one or a few asset classes. Take Canada, for instance, which has elevated exposure to natural resources and materials. And also consider Taiwan, which is exposed to technology companies.
The U.S., on the other hand, has exposure to both of these industries and more, says Hollond, and this is great for investors who want more options in the small- and mid-cap space.