The economic recovery will be weak as consumption slows down, capping the growth in corporate earni...
The economic recovery will be weak as consumption slows down, capping the growth in corporate earnings, according to Credit Suisse UK manager Bill Mott.
'Global growth will be very anaemic because both American and British consumers have overspent and undersaved,' he said.
'Their rate of consumption will have to decline. That means earnings growth will be pretty weak and growth companies are overpriced.'
While the past few months have been a difficult ride for equity investors, Mott believes the market weakness has provided him with ample choice of value stocks.
He said: 'Shares are closing at levels that offer good long-term value so we can now find equities for income funds that are offering good medium-term rewards, with income equivalent to cash and bonds and some long-term upside potential on capital.
'But I wouldn't hold your breath for those capital gains to be delivered other than on a volatile trading basis.'
Mott's portfolios are overweight food manufacturers and building materials and underweight technology and telecoms.
'We're looking for high yields, economically insensitive, low but projectable earnings-growth companies with strong balances and the ability to be sustained going forward,' he said.
'Until the global economy is rebalanced and goes through a period of convalescence, these stocks are likely to continue to outperform, which is why I believe equity income funds will be the best UK equity asset class going forward.'
Mott describes himself as a thematic investor, tailoring his funds' portfolios in accordance with his economic outlook.
'Stock selection is of secondary importance to spotting the future dynamics of the economy and making sure I've got shares that are best suited to that,' he said.
Mott is manager of the £726.9m Income and £282.9m Monthly Income funds for Credit Suisse, which have returned 20.6% and 22% respectively over the three years to 8 July after charges, against a sector average of -13.6%. He manages risk through diversification, running around 100 stocks in the income fund and 80 in monthly income.
'The absolute risk is low but against the benchmark it is high because, if we don't like a sector or stock, I won't own it, regardless of its weight in the index,' Mott said.
Previously something of a one-man band in running his funds, Mott is now making use of the stockpicking skills of Credit Suisse Extra Income fund manager Leigh Harrison, formerly of SLC Asset Management Group, which was acquired by Credit Suisse Asset Management in October 2001.
Including former SLC staff, the Credit Suisse equities fund management team has grown to eight members, from four prior to the merger. However, Mott said the additional staff are not an indication he is readying the desk for his retirement.
'I'm continuing to run the money but, obviously, it's nice to have a bigger team to help me share the burden and especially to have Leigh Harrison on board to run the extra income fund and deputise for me when I'm on holiday or off sick,' he said.
'I have no plans to retire and intend to continue running the money for the foreseeable future.
'But I am pleased by the fact Leigh Harrison is now an important and vital colleague who also has long-term experience in money and income funds. That should be a comfort to our investors.'
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