By Leo Bland Threadneedle's mainstream UK growth Oeic is overweighting the resources area of the ma...
By Leo Bland
Threadneedle's mainstream UK growth Oeic is overweighting the resources area of the market amid a bullish view on the oil price.
Threadneedle UK Growth, managed by Forsyth McGarrity, has overweight positions in oil stocks, including Shell, as the group believes the oil price will stay higher for longer than the market is anticipating. McGarrity added Shell is showing evidence its restructuring programme will deliver cost cuts and improved returns.
The Oeic is also overweight the media sector in the belief brand and quality of content will continue to drive these stocks, with favoured holdings including BSkyB and EMI.
In its UK equity investment process, Threadneedle looks at the top 20 stocks in the UK market, which account for around 50% of the FTSE All-Share, and takes a group position on whether to hold them and on what weightings.
Threadneedle UK Growth follows these recommendations but has the ability to take more aggressive positions than the house view on stocks it favours. The stocks held on the back of house views on the top 20 UK companies account for around 50% of the portfolio.
Around 20% to 25% of the portfolio is also made up of stocks which represent the best ideas from Threadneedle's company research outside the largest 20 companies. McGarrity says the fund tends to hold all of these stocks, of which there are currently 22, and these include Enterprise Oil and Reuters.
McGarrity said: "The remainder of the portfolio is constructed from how we are viewing the world economy and which sectors and stocks we should be underweight or overweight in. We have a strong bias towards quality and consistency. We think the market estimates for earnings are too high and we are focusing on companies with strong earnings and cash generation. We are underweight in the manufacturing sector as we believe the relative strength of sterling against the euro and rising raw materials prices are big negatives for this area of the market."
The fund is also underweight telecoms on the back of the large amount of issuance of telecoms equity and is neutral in the technology sector. Technology holdings include ARM, RM Group, Autonomy and Logica.
McGarrity added: "We have 95 stocks in the overall portfolio, because of the size of the fund we need to have more holdings than our other funds to get exposure to small and mid cap companies. We are trying to be fairly conservative in terms of running the fund and we are aiming for solid and consistent performance."
Around 74% of the portfolio is made up of FTSE 100 stocks, with 21% in mid caps and 4% in small caps.
Threadneedle UK Growth has an frA rating and is £1.39bn in size. It is ranked 131 out of 231 funds in the UK All Companies sector over three years to 6 September on bid to offer growth of 37.1% It is 156 out of 286 over one year on bid to offer growth of 5.6%. The fund is 189 out of 302 over three months on growth of 2.9%.
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