gartmore's senior investment manager ashley willing holds minimum 50% weighting in Telecoms, oils, pharmaceuticals and banks
The four largest UK sectors should not be ignored when managing aggressive concentrated portfolios, according to Ashley Willing, senior investment manager at Gartmore.
Willing always holds a minimum half weighting in each of the four big sectors: telecoms, oils, pharmaceuticals and banks.
He told delegates at a recent Investment Week conference in Portugal: 'The four big sectors account for more than 50% of the market. They are too big to ignore. If the position is right then the fund does well; if it is wrong, then it will not be terminal to relative fund performance.'
A hallmark of Willing's investment style is his desire to exploit every opportunity. 'That means making gains at every market stage, using both long and short-term ideas,' he said.
'The potential impact of short-term holdings is significantly greater than in more diversified portfolios. A portfolio of 30 long-term ideas is likely to be highly inconsistent and inefficient. We need to marry the long term to the short term to smooth performance over the cycle.'
Willing manages the Gartmore UK Focus fund, which holds around 30 stocks, as well as a long/short hedge fund product. The tracking error of Gartmore UK Focus ranges between 5% and 10%.
The long-term holdings in the fund are the best ideas from all sources, he said. These are generally found in industries that grow whether GDP growth is high or low. At an individual level, these companies have the strength of franchise to take advantage of premium industry growth, Willing added.
One such long-term holding is BSkyB, which Willing said operates in a high growth industry, with growth coming from the increase in subscribers and average subscriber spend. The company also has unique content which it owns and exploits, a factor likely to lead to further unexpected earnings growth.
Another example is Compass Group, operating in a fragmented but high growth industry, driven mainly by outsourcing. The company is a leading global franchise, according to Willing, with strong management and brands.
By contrast, short-term holdings are more about price. One example is Cable & Wireless, which Willing bought last December at 40p and sold recently for 80p. Willing did not own the stock while it issued four profit warnings last year but over-reaction to a potential tax liability provided an attractive entry point, he said. The tax issue is now resolved and the company has a new chief executive, which led to a rise in the share price.
Willing operates with strict stop loss targets of 10% and will also set price targets to take profits.
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