US president Donald Trump’s protectionist aspirations might have spooked investors around the globe, but they didn’t shake the confidence of Deutsche Asset Management portfolio manager Tim Albrecht on the prospects of German equities.
The Citywire AA-rated manager doesn't think the Trump administration will levy a tax on imports but even it if did, the local presence of German companies in North America could help insulate them from the potential blowback, he added.
‘Immediately after the election, we analyzed the international value chain and the exposure of German companies,' he said.
'We very soon found out that many German companies are very important employers in the US, for sure importing some goods in the US, but also even exporting finished products to the rest of the world.'
Overall, Albrecht has said German equities will continue to outperform as the Eurozone's economic prospects keep improving.
‘It’s well understood […] that Germany is a kind of growth engine within the Eurozone. It’s well understood that German companies have strong earnings power, that they have a better growth profile than the rest of the Eurozone companies for the last decade.’
Albrecht (pictured) runs the DWS Deutschland, a €6.8 billion ($7.7 billion) growth-oriented German equities fund. It has returned 15.77% in the past three years, while its Citywire-assigned benchmark, the CDAX TR, has risen 7.04%.
As of the end of March, it ranked as the mutual fund in which Chilean pension funds had parked the most money, with a total investment of $2 billion.
Germany, a 'growth engine'
Despite trading above their historic averages, German equities should continue to benefit from investor interest in stocks given low interest rates, Albrecht said.
Albrecht describes his investment process as one-third top-down sector selection and two-thirds stock picking, a method that has led to an overweight in technology and industrial stocks and to an underweight in automotive stocks in the past six months.
As of May 31, its top three holdings were IT firm SAP, financial giant Allianz and industrial company Siemens, according to the fund's factsheet.
In his latest market commentary, Albrecht said an overweight in tech companies Freenet and Software AG and an underweight in Volkswagen had contributed to the fund's performance.
‘What we see in the industry is topics like digitalization, cloud business, industrial automation, there a lot of drivers that are very positive for the industrial sector and for the industrial companies.
‘We have to accept that automotive stocks are suffering from the rise of electric vehicles, auto driving, battery tech. Many people doubt that the German manufacturer will be a winner of this tech transition to electric vehicles.’