Charles Mackinnon: the top 40 equities we have exposure to

The market crisis prompted the Thurleigh investment chief to take a fine toothed comb to his firm's core portfolios to identify the top 40 equities it has exposure to on a thematic basis.

Mackinnon writes:

Our fundamental investment thinking is that the days of ‘Empire USA’ are over.  This process will take at least a decade to work out, and will be characterized by a lackluster period of growth in the developed world (USA, UK, EEC). 

We expect volatile, but higher growth in the ‘growth economies’ such as Brazil, China, South Korea and India.

The reason that we think that growth will be slow in the G7 economies is the need to pay down the debt that has been incurred in the last twenty years.  This debt will be paid off in three basic ways.

* Through inflation and devaluation of the currency such as the USD, sterling against the growth currencies of the CNY (Chinese Yuan) and BRL (Brazilian Real)

* Through the reduction of spending on public sector employment

* Through the reduction of entitlement to benefits such as healthcare, pensions, social security benefits.

Each and every one of the above strategies has a negative impact on growth, and can be construed as ‘short term pain, long term gain’ and, as such we anticipate continued deep political battles over implementation.  Politicians around the world and voters always prefer the ‘short term gain, long term pain’ measure, but their room for maneuver is becoming increasingly limited.

So, who will be the winners in this low growth bumpy environment?  Given our long term thinking as outlined above, we are focused on three main themes: