Q4 Outlook: A look at key issues, sectors as 2018 approaches
We believe there are opportunities in companies that continue to demonstrate strong fundamentals – despite the occasional distractions of the global news cycle.
The longstanding brick-and-mortar retail business model faces growing disruption from online and mobile e-commerce businesses. The scenario is reaching critical levels for many retail companies in the U.S. but also is playing out in countries around the world. The expansion of consumer populations, especially in emerging markets, has spurred demand for goods and services that previously may not have been available through traditional markets. Disruptive technologies are affecting the shopping experience, but also are changing business logistics and delivery methods. And the changes are likely to continue.
Source: U.S. Census Bureau, estimated quarterly U.S. retail sales, May 2017; (p) = preliminary; e-commerce sales are sales of goods and services where an order is placed by the buyer or price negotiated over an Internet, extranet, Electronic Data Interchange (EDI) network, electronic mail, or other online system.
Cynthia Prince-Fox and Chace Brundige, CFA, portfolio managers, believe online and mobile e-commerce will remain a key driver of change for retailers in the U.S. and other countries.
Here are three examples of companies that are disrupting the retail business model around the world.
Amazon.com, Inc. (AMZN)
Amazon offers a range of products and services through its websites. It operates through three segments: North America, International and Amazon Web Services (AWS). Products include merchandise and content that it purchases for resale from vendors and those offered by thirdparty sellers. It also manufactures and sells electronic devices.
Alibaba Group Holdings LTD. (BABA)
Alibaba Group’s seeks to make it easy to do business anywhere. It provides the fundamental technology infrastructure and marketing reach to help businesses leverage the internet to engage with users and customers. Alibaba Group’s businesses include core commerce, cloud computing, digital media and entertainment, and innovation initiatives.
Mercadolibre, Inc. (MELI)
MercadoLibre hosts the largest online commerce and payments system in Latin America. Its efforts are centered on enabling e-commerce and digital and mobile payments via a suite of technology solutions. The company is present in 18 countries, including Argentina, Brazil, Mexico, Colombia, Chile, Venezuela and Peru.
Past performance is not a guarantee of future results.The opinions expressed are those of the Fund’s portfolio managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through August 2017, are subject to change based on market conditions or other factors, and no forecasts can be guaranteed. The holdings discussed are for illustrative purposes only and are not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy.
Investment return and principal value will fluctuate, and it is possible to lose money by investing.
AMZN: 1.49%, BABA: 1.61%, MELI: 0.97% of net assets as of 06/30/2017.
Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. The Fund may allocate from 0 to 100% of its assets between stocks, bonds and short-term instruments of issuers around the globe, as well as investments in precious metals and investments with exposure to various foreign securities. International investing involves additional risks, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Fixed-income securities are subject to interestrate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. The Fund may focus its investments in certain regions or industries, thereby increasing its potential vulnerability to market volatility. The Fund may seek to hedge market risk on various securities, increase exposure to various markets, manage exposure to various foreign currencies, precious metals and various markets, and seek to hedge certain event risks on positions held by the Fund via the use of derivative instruments. Such investments involve additional risks, as the fluctuations in the values of the derivatives may not correlate perfectly with the overall securities markets or with the underlying asset from which the derivative’s value is derived. Investing in commodities is generally considered speculative because of the significant potential for investment loss due to cyclical economic conditions, sudden political events, and adverse international monetary policies. Markets for commodities are likely to be volatile and the Fund may pay more to store and accurately value its commodity holdings than it does with the Fund’s other holdings. These and other risks are more fully described in the Fund’s prospectus. Not all Funds or fund classes may be offered at all broker/dealers.