Thoughts from our Domestic Equity Team
One aspect of our Rebuild and Retool theme is our expectation that after several years of underinvestment following the financial crisis, corporate America may be poised to boost capital spending. Of late, more investors have publicly expressed their frustration that management teams have not been more proactive in terms of investing to drive future growth. The Wall Street Journal recently ran an article echoing this view, citing a fund manager survey in which 58% of respondents wanted companies to devote excess cash to capital investments compared with just 11% who favored keeping it on their balance sheets. And in March, Larry Fink, CEO of Blackrock, publicly voiced his concern that corporate management teams were placing too much emphasis on dividends and share repurchases and were not focused enough on reinvesting in their businesses. At some point we believe that regardless of investor views, companies must ramp up their capital expenditures, but in this age of shareholder activism, perhaps this pressure will prod management teams to begin the process sooner rather than later.
Submitted by: Jason Sheer, CFA - Portfolio Manager
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