Threadneedle is awaiting a downturn in the North American market to use as a buying opportunity to a...
Threadneedle is awaiting a downturn in the North American market to use as a buying opportunity to add to its US technology and media exposure across its global equity portfolios.
It is also maintaining a positive position on oils because of perceived supply-side support, but has moved to neutral weighting on telecoms, a sector which it sees as undermined by growing equity supply and rising investment spending.
Fund manager Sarah Arkle, head of equities and managed funds and lead manager of the Threadneedle Global Select Growth Fund, said once economic data from the US shows a significant downturn there will be an opportunity for stock-pickers to increase positions in select stocks as their prices fall.
The Global Select Growth Fund was to have been renamed Select Global Trends to reflect the emphasis that Threadneedle put on the strong global sector bias in their investment process, however, the cost of literature and marketing changes prohibited the move.
Arkle said: "The economic news from the US has been favourable recently, but I am sure that there will be a certain amount of volatility. If we see less favourable figures I would look on them as a buying opportunity."
She warned that stock-picking mistakes will be punished by the market. She said: "The markets are being selective and I think that a number of technology stocks will not get back to their previous highs. It will be on a stock-by-stock basis and I would be looking to put more money into the US market."
Positions on global strategy are contributed to by all Threadneedle fund managers who are organised into both geographical and global sector teams. From that matrix investment process, a core stock list is created. House policy dictates that the lower risk general funds must have 60% exposure to this core list, while the higher risk select growth portfolios must retain a 40% weighting to it.
Arkle said Threadneedle remains negative and underweight on banks, consumer cyclicals, industrials and utilities, and neutral on pharmaceuticals with a bias towards UK and US pharmaceuticals because of the lower quality companies on offer in mainland Europe.
The downgrading of telecommunications is based on Threadneedle's concern that while the cost of debt is increasingalong with the rise in investment costs, equity supply in the sector continues to grow.
Arkle has reduced the weighting in Vodafone, which made up 3.6% of the fund on 31 May, but retains confidence in the stock because its debt and investment burden is offset by the sale of non-core business elements in Mannesmann such as its engineering arm.
NTT DoCoMo, which made up 1.1% of the fund at the end of May has fallen out of the top 10 completely because Threadneedle believes its policy of taking minority positions in international telecoms enterprises is flawed.
Threadneedle's confidence in oils comes from a belief that economies remain generally strong and the supply side remains favourable. The themes are strongly represented in the top 10 holdings of Arkle's Global Select Growth Fund which is heavy on technology and oils.
Despite the neutral weighting on telecommunications, Vodafone Airtouch is the biggest stock in the fund representing 2.6% of the portfolio.
It is followed by BP Amoco at 2.1%, Shell Transport & Trading at 1.9%, Total Fina Elf SA at 1.6%, General Electric at 1.3%, Nabors Industries with 1.2%, Ericsson B at 1.2%, Nokia at 1.1%, EOG at 1.1%, and Cable & Wireless at 1.1%.
Arkle said the Threadneedle process retained a strong geographical top-down input which has resulted in the Japan weighting falling from 11.4% to 9.1% since 31 May, 2000.
The weighting in Europe ex-UK has climbed by 2.1% to 27.1% and exposure in Asia and Latin America has also increased. The weighting in the US has increased from 23.3% on 31 May to 27.0%.
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