Katherine Garrett-Cox has dropped 90 stocks from the Aberdeen North America fund and added in 24 n...
Katherine Garrett-Cox has dropped 90 stocks from the Aberdeen North America fund and added in 24 new names, within her first two weeks of heading up the fund.
This has tightened the portfolio from 124 holdings to 58 and has switched the bias to favour mid-cap stocks and technology.
The reshaping follows Garrett-Cox's announcement in Investment Week on 11 September that she intended to remodel the portfolio along the lines of the successful Hill Samuel American Growth Fund which she and her team of Alex Ingham, Steve Cairncross, Rupert Howard and Rupert Della-Porta ran from 1993.
Investors in the fund now hold a much more focused and aggressive portfolio from the one they held two weeks ago, which was ranked 84 out of 89 funds on three month bid to bid returns of 6.3% up to 30 August.
Up to that date it was ranked 81 of 89 funds over one year with offer to bid returns of 7.4% and 79 of 81 funds over three years with returns of 27.4%. Garrett-Cox said her team's style is to run portfolios of between 50 and 60 stocks.
She said: "The reason we are at the higher end of that right now is that we have a higher proportion in mid cap stocks. We have traditionally been focused on the large stocks, but we recognise that right now a number of big companies are struggling to make their earnings."
Around 34% of the fund is in stocks with market caps of between $5bn and $25bn compared to the S&P500 weighting of 20%.
There have also been sweeping changes in sector allocation. Garrett-Cox said the 124-position portfolio she inherited was broadly sector neutral, but underweight technology and overweight energy and basic materials.
She said many elements of the portfolio failed to logically address the basic macroeconomic realities of a slowing US economy and peaking interest rate cycle. Despite the changes Garrett-Cox said the new portfolio is still broad-based and has exposure in most sectors.
She has moved to an overweight position in technology, which is one of her long-term key plays, though is cautious about many areas of telecoms. Basic materials has been reduced to a zero weighting, and energy has been cut back to neutral.
The fund has moved to overweight in financials to play the interest-rate cycle, which she believes is near, if not at, its peak. Garrett-Cox is not playing the cycle through banks but through insurance names, such as Met Life, which are attractively priced and have reclaimed some pricing power.
She is modestly overweight in the healthcare sector though is playing the sector through medical suppliers rather than focusing on the big pharmaceutical companies which are operating under a political cloud.
The new top 10 holdings, which make up 29% of the total portfolio, include GE at 5%, Cisco at 3.5%, Intel at 3.5%, Nortel at 2.5% and EMC with 2.5%.
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