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Current Views

December 10, 2013: Rethinking Trends in Capex

Thoughts from our Domestic Equity Team

As part of the current economic recovery, we expected to see a trend toward increased corporate capital expenditures (capex). However, a more nuanced picture has recently emerged indicating that many companies are continuing to hold onto their cash as well as their equipment and assets.

In fact, Corporate America is relying on capital equipment and infrastructure that is on average older than at any point over the last 30 years, according to J.P. Morgan. While we believe this trend is unsustainable in the long-term, we do not think a general recovery in capital expenditure is imminent. In fact, we anticipate that companies may opt to let their existing assets age as they wait to have a clearer read on consumer demand. Furthermore, technological advances may be helping companies get more life out of their existing assets.

Based on our current read of the capex environment, we have selected a more targeted investment approach. In particular, we are looking at companies that:

  • enable the production capacity of other companies to remain high without large capital expenditures. For example, makers of 3D printing equipment can create temporary replacement parts for companies with broken equipment.
  • sell to firms that may have no choice but to make capital expenditures due to aging equipment and technology.

You can find these recent investments in our new “Rebuild and Retool” theme.

Submitted by: Lee Caleshu, CFA



This information is intended solely to report on investment strategies and opportunities identified by Roosevelt. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Please contact us at 646-452-6700 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions, or if you would like to request a copy of our Code of Ethics. Our current disclosure statement is set forth on our Form ADV Part II, available for your review upon request, and on our website, www.rooseveltinvestments.com.

Past performance is not a guarantee of future results. Indices are unmanaged and cannot accommodate direct investment. Themes assigned as per Roosevelt Investments’ evaluation. Risk tools may include cash or other securities that we believe possess a low or inverse correlation to the overall market.


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