Our assessment of which stocks UK funds are buying and selling is a new part of our regular monthly look through proprietory Morningstar Direct data, which investors can use to help make informed decisions on their finances.
The funds included in our search are all active, domiciled in the UK, and have assets above £1 billion. In total, 97 funds fit this criteria. From there, we have collected the biggest purchases, the biggest sell-offs, and the trims and additions.
It’s worth noting 15 funds have not made any trades in Q1 and are holding their course, while another 42 have not reported their portfolio holdings within the past three months.
In total, these funds have added 129 stocks to their portfolios for the first time and added to another 82 holdings. On the other side, they have sold completely out of 115 different stocks and trimmed 36 holdings altogether.
What Have UK Funds Bought?
The biggest purchase by any fund so far this year was made by JPM Natural Resources, which bought over 210,000 shares in 3-star stock Marathon Petroleum (MPC). The holding now makes up 2.05% of the fund’s entire portfolio. Unsurprisingly, the fund also made two of the biggest sales, which could have been used to fund the position.
The second biggest buy was made by another JP Morgan fund – JPM Japan – which added T&D Holdings (8795), making it the only other stock purchase now representing over 2% of a portfolio. For reference, the top five holdings for both funds range between 3% and 7%.
Two financial services firms also made the top buys, UniCredit (UCG) and 4-star HSBC (HSBA). The banking industry had a tough quarter-end when Silicon Valley Bank's demise rocked sentiment in the sector, and, in the UK, prompted mass outflows from positions in its UK arm. That was subsequently bought by the aforementioned HSBC. To top that off, Credit Suisse was then sold to UBS, but the funds in our search did, however, purchase UCG and HSBC before all that turmoil began.
Another big purchase was CT European Select’s addition to Norwegian bank DNB (DNB), increasing the exposure from a stake below 0.01% to 2.02% (up 2,460%). This is the biggest percentage change in allocation for any fund.
In a recent banking analysis by Morningstar’s Niklas Kammer and Johan Scholtz, the two concluded that the market volatility in mid-March, spearheaded by the Credit Suisse collapse, has made European banks even cheaper.
"European banks’ balance sheets are sound and have ample liquidity and robust capital buffers," they said.
Meanwhile, two funds increased exposure to two stocks to above 3%, the biggest upwards changes this year. Stewart Investors Asia Pacific Leaders Sustainability has upped holdings in Shenzhen Inovance (300124) by 50% to 3.34%, making the electric equipment producer its 13th biggest position.
Next, Fidelity Special Situations bought almost 10 million shares in Roche (ROG), a 52% increase. This is now the fund’s third biggest holding, behind a Fidelity liquidity fund and the tobacco giant Imperial Brands (IMB).
What Have UK Funds Sold?
Topping the list of biggest disposals are stocks in the healthcare sector. The biggest was Fidelity Special Situations' AstraZeneca (AZN) sale. The fund sold half a million shares and freed up 2.13% of its portfolio – so an approximate calculation with today’s (April 12, 2023) stock prices and currency exchange shows this sale was worth about £65 million. The strategy’s previously-mentioned Roche purchase is worth about CHF40 million (£35 million).
Johnson & Johnson (JNJ) and Abbott Laboratories (ABT), meanwhile, were sold by two different BNY Mellon funds.
Insurance and finance does also make appearances on the list, with the biggest being Martin Currie UK Equity Income’s sale of Direct Line (DLG) (which received a lot of attention at the start of the year when it cut dividends and swapped CEO).
That said, a noteworthy trend is that of natural resource-related stocks, as one infrastructure and one natural resources fund decided to shift two major holdings each. First Sentier Global Listed Infrastructure sold its stakes in Pembina Pipeline (PPL) (oil and gas midstream) and ONE Gas (OGS) (regulated gas utility), worth 1.3% and 1.1% respectively.
The other fund also appears above. Having made the biggest purchase, JPM Natural Resources also made big sales. It got rid of its 400,000 Norwegian oil/energy giant Equinor (EQNR) shares, worth 1.08% of the portfolio. It also sold another stock: Barrick Gold (GOLD) (a 1.09% holding).
Another gold stock is also just short of making our list. Fidelity Global Dividend sold its 0.7% exposure to Newmont (NEM). These sales come as gold prices enjoy a price surge – the benchmark London spot gold broke through the $2,000-an-ounce level on 20 March, the highest price seen in the past 12 months. This means two gold funds topped our best- performing funds list, and ETF list, for March.
"There is a long-standing relationship between the economic crisis and the price of gold. When there is uncertainty in the economy, investors tend to turn to gold as a safe-haven asset, which drives up its price," my colleague Valerio Baselli wrote earlier this month.
When looking at trims and additions, we’ve excluded stocks with a weighting below 0.5%, as any major percentage cut would in these cases still only be small changes. With this change, the biggest trim in Q1 was Baillie Gifford Long Term Global Growth Investment Fund’s sale of almost 70% of its Salesforce (CRM) shares. This was closely followed by BNY Mellon Real Return’s Exelon (EXC) (another natural resource stock) trim, at a similar size and weighting.
A notable sale just shy of the trims and addition list was Fidelity’s Emerging Markets fund, which cut half of its Infosys (INFY) holdings. The fund still allocates 1.2% of the entire portfolio to the company.
And the Most Trades Award Goes to...
The fund that made by far the most trades this quarter was Dimensional Emerging Markets Core Equity. It bought 41 new stocks, sold 50, and made 47 changes to existing holdings.
For reference, the fund holds 6,305 stocks and its largest holding is Taiwan Semiconductor Manufacturing Company (2330) at 3.70%, which Warren Buffett recently sold amid much discussion by commentators.
Dimensional's EM offering uses a quantitative approach, however, which somewhat explains the speed at which it trades, as it seeks to pounce on opportunities at a higher frequency than a standard active fund would. By comparison, the second-highest number of stocks bought by one fund was 10 and the second-highest number sold was 6.
