fund manager of the martin currie uk growth fund is overweight vodafone, BT and mm02
Jeff Saunders, manager of the £63m Martin Currie UK Growth fund, is heavily weighted towards the telecoms and mining sectors.
Although a bottom-up stock picker, Saunders said telecom stocks are displaying all the qualities he looks for when choosing companies so has ended up with 16.7% of his fund invested in the sector compared to the All-Share index weighting of 9.7%. He holds overweight positions in Vodafone, BT and mmO2.
Each of these companies is displaying similarly attractive characteristics, according to Saunders. Primarily, they are cutting back on capital expenditure, which will increase their bottom line, he said. Much of this extra funding is being used to decrease debt.
'Fortunately, these companies are not being competitive with each other so are able to increase prices, which is being masked by complicated charging structures,' Saunders said. 'Additionally, the number of subscribers is growing and handsets have stopped being subsidised, which goes back to reducing capital expenditure.'
Meanwhile, mining stocks represent 8.8% of the fund, more than double the All-Share weighting of 3.5%. The key stock position in this sector is Anglo American.
Saunders sees opportunities for increased profits amid strong demand for metals from China, as well as from the rebuilding of Iraq.
In determining good investment opportunities, Saunders screens the top 350 stocks in the market and looks at six key criteria that help locate undervalued companies likely to undergo positive earnings revisions.
These are financial strength, valuation, prospective growth, earnings forecast change, share price trends and directors' dealings in their own shares.
The fund was launched in 1988 and Saunders took over management in January 2001, joining the group after almost two decades at Standard Life Investments.
The Martin Currie UK Growth fund contains around 30 stocks. Saunders aims for a tracking error of 6% and active stock positions are restricted to around 5%, against index weightings, on both the positive and negative side.
UK Growth tends to have a mid-cap bias, which is more a result of where Saunders finds the best stock opportunities than any deliberate focus towards this end of the market.
Over one year, the fund holds a top-quartile position, ranked 48 out of 296 funds in the UK All Companies sector, losing 25.9% compared to the sector average loss of 29.5%, offer to bid.
It is rated AA by Standard & Poor's and was top decile in the sector over the calendar years 2001 and 2002.
Media is the most underweight sector in the fund. Despite representing 3.7% of the UK market, Saunders holds no exposure to companies in this sector.
'There is very little opportunity in the sector,' he said. 'I do not see the outlook for any of the stocks improving.'
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