Salient to Investors:

Martin Connaghan at Aberdeen Asset Mgmt said:

  • Buying industrial stocks with stable revenue and selling health-care stocks as uncertainty about the global economy has caused cyclicals to lag pharma and other defensive stocks by a margin that is too wide to ignore. The outlook for cyclical stocks won’t necessarily change in the immediate future, but there is a lot of bad news and low expectations.
  • Some industrials such as elevator and escalator makers have stable income from contracts that make them less sensitive to global growth.
  • Some industrials are not as cyclical as they appear at first glance if you look at their revenues, because there is always a base level of income and revenues coming from areas that are more stable, regardless of the economic environment.

Worldwide industrial shares are trading near the lowest valuation relative to health-care stocks in more than a decade.

The MSCI World Industrials Index trades at 18 x earnings versus 22 x for the global health-care index, the widest margin since October 2002.

US ETFs tracking health-care have attracted $4.3 billion in 2014 versus $530 million for industrial ETFs.

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