Fund Managers Embrace UK Focused Companies

Investment professionals are shunning international revenue streams for home-grown growth

Emma Wall 31 July, 2013 | 5:53PM
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Invest in the FTSE 100 and you gain access to more than just the UK economy. Most private investors are aware that the blue chip index sources more than two thirds of its earnings overseas. 

Many UK equity managers extol this diversified revenue stream as an advantage - you can gain exposure to high growth economies such as China, India and Brazil but with the high levels corporate governance and transparency of a developed stock market. 

But five key UK fund managers are now turning their backs on international exposure, choosing instead to focus on companies that have domestic earning streams. 

It is not an obvious tactic. Where the Chinese economy is growing at a rate of 7.5% in the second quarter of 2013, UK GDP can not make such boasts. 

The Office of National Statistics last week estimated that UK GDP grew by 0.6% in the second quarter of 2013 - an improvement on the last couple of years, but hardly a booming economy.

This is about individual stock picks however, rather than the nation as a whole. 

Champions of UK Plc say that the companies that have managed to survive the recession are in good shape - having stripped out inefficiencies and balanced the books. 

These hardy stocks are therefore best placed to benefit from a domestic recovery - no matter how anemic. 

Fund managers have added to their UK focused holdings such as Majestic Wines, The Restaurant Group and Redrow.

Brokers' notes compiled by Morningstar.co.uk rate Restaurant Group as a "buy". The company operates more than 400 restaurants and pubs nationwide. Brands include Frankie & Benny's and Garfunkel's.

Brokers also rated Majestic Wine as a buy, and Redrow - the house builder - as a hold.

Jon Ingram, manager of the JPM UK Dynamic fund thinks UK stocks are cheap, in that both the dividend yield and the PE ratios are at levels that historically have been predictive of subsequent market returns of 10 – 15%.

He likes house builders, life insurers and leisure companies such as EasyJet.

Tim Steer at Artemis has added domestically focused stocks, Fidelity's Trevor Greetham is playing a UK housing led recovery in his multi asset funds and Chris Murphy from Aviva is also looking to capture the recovery. 

 

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
easyJet PLC6.19 USD-6.92
Naked Wines PLC53.00 GBX-0.38
Redrow PLC  
Restaurant Group (The) PLC  

About Author

Emma Wall  is former Senior International Editor for Morningstar

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