The US should be a big portion of any portfolio, and not just because it’s is a large portion of the benchmark. I believe it offers a unique range of opportunities not available in other markets.

Over the past 10 years, the US market hit a wall and additional revenue had to come from somewhere else, such as the Bric countries like India and China. Indeed, there’s still tremendous demand coming from these. That said, during the downturn of 2008, US equity markets were much more defensive, with upside potential. It’s still like that today, which is why people should invest in it now.

The market is still dominated by super large-cap companies, and they’re stuck there. Apple is a good example. As the company is so large, it’s hard for it to move or grow in the future. On the other hand, smaller companies have benefited from the low interest rate environment, so now we need to focus on these for value.

With the end of QE2, there are hopes that the government will support other structural projects, such as high-speed rail lines. To get the economy back on the right track, the government must stimulate demand rather than just printing more money. The end of QE2 will hurt the bond market, because the equity market is becoming more attractive, as the yields are quite high. As for QE3 – I don’t think it will happen. However, the economy’s not strong; it will chug along for a while until the housing market improves and unemployment decreases.

We’re bargain hunters, finding companies with potential for future growth. We’re looking at cheap companies, fallen angels in the market place, ones that are undergoing change to be better in the future. One example is Starbucks – it’s a solid business franchise, has great brand valuations, but about three years ago, its stocks were not doing very well. It couldn’t grow as fast and the stock price came down so it was a good opportunity. But then it did better, we trimmed it then eventually sold out if it. We’re looking at the US market from a bottom-up approach. US small caps have done well, the earnings environment is doing well and this will hopefully provide more volatility, which is why I need to pick stocks that are cheaper and have growth potential.

Other examples are Brocade Communications Systems – a computer network device company that is a much more niche player to rival Cisco. It’s relatively cheap and an innovation leader, and has a bright future. We’ve also invested in Varian Medical Systems, as healthcare is a long-term growing sector. We avoid airline companies – there are structural problems in the industry – and we also avoid utilities.

There is an exception, however. We bought Apple in 2002 and have never sold out of it. We’ve seen through the introduction of the iPhone, iPod and iPad, and Apple is becoming fundamentally stronger. Valuations are getting higher and higher, but we have trimmed it so much we’re underweight at only 1.5 per cent. As Apple is so widely owned, we’re a contrarian manager, and would rather invest in under-favoured small and mid-caps.

By Seung Minn, fund manager of the Allianz RCM US Equity Fund