Uncertainty in the UK market continues, and many fund managers are focusing on stock selection rathe...
Uncertainty in the UK market continues, and many fund managers are focusing on stock selection rather than sector specifics in their portfolios.
Robert Moss, fund manager for the Invesco GT UK Growth Fund says: "There is a lot of uncertainty in the market at the moment, and there have been extreme valuations in technology, pharmaceuticals and food stocks."
He believes the market has been pushed by fear and greed and believes it will continue to be volatile. Moss adds: "We buy stocks longer term and look for growth stories. We have a diverse portfolio at the moment and look for companies with strong brand names, good steady returns, strong delivery results and good valuations."
The Invesco GT UK Growth Fund is not sector driven but rather focused on stockpicking. However, Moss expects financial and healthcare companies to do well going forward.
Moss recommends healthcare company Biocompatibles International, which specialises in coronary disease. Invesco favours this company because it focuses on growth by innovation and has strong profits and a strong management outlook.
Invesco also holds nightclub operator manager Luminar because of low valuations. Media is also favoured because of low valuations.
Moss adds the UK market is relatively undervalued at the moment and could make some progress, but he does not think progress will be extreme. He believes the US interest rate cuts could stimulate the UK markets.
Stewart Methven, UK investment manager at Edinburgh Fund Managers, says there is a tight monetary backdrop in the UK and there are no signs of real big fiscal expansion. The UK had a reasonably healthy Christmas period and he says the money supply data suggests there is no need for rate cuts.
Consumer expenditure also continues to look reasonably healthy. Methven expects sterling to weaken against the euro as the stabilisation of the euro has seen the start of a trend for its strengthening.
He adds: "Markets are in a fragile state and it is a difficult economic backdrop to be in at the moment. British Aerospace has recently given bad profit warnings."
Edinburgh Fund Managers also emphasise stock selection rather than being sector specific. Methven says companies with good growth rates will be the ones he will be looking at.
The companies he recommends are mainly financials as they will benefit from the rate cuts. He also favours construction companies as they typically respond well to movements in interest rates.
Alex Crooke, divisional director of Investment Trusts at Henderson Global Investors, says the prospect of a US recession will have an obvious impact on the UK. Economists estimate each 1% fall in US growth will reduce UK growth by around 0.25%.
He says: "The Bank of England is mindful that the benefits of lower rates take six to nine months to filter through, and reacting earlier rather than later may prove to be the right decision."
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