“We tend to find that in the States market rewards are greater when interest rates rise," Coombs said.
"We see the same for ‘proper’ tech companies excluding the likes of Facebook and Twitter, which add productivity to the portfolio. There is a pent-up demand for capex in tech,” he said.
Quality companies that are not heavily indebted and companies that can grow top-down revenue are those likely to profit from rate hikes.
“It’s not rocket science, and it’s not a short-term view,” Coombs said.
This philosophy is reflected in his portfolio where he has upped exposure to US and Japan funds, while moving away from UK equities. However, in the first quarter this year he started rebalancing the portfolio after seeing that some growth stocks were down, and started to edge away from the US.
Part of this investing approach is also differentiating between the micro and the macro.
“Investors need to be looking at micro not macro drivers. There’s not much to get excited about in the macro space,” he added.
When it comes to large versus mid and small-caps, he finds large caps difficult to handle.
“I ask myself, do I want a company like Shell in my portfolio in four years time? The answer is, not really,” Coombs said.
On the other hand, Coombs said, it is difficult to tell how long investors will continue to buy into small and mid-caps.
“It’s a short-term thing to be in small and mid-caps. But if you ask me is it over? I’m not sure whether it is.”
