Gartmore has moved to an overweight position in media stocks across its UK portfolios in a bid to ca...
Gartmore has moved to an overweight position in media stocks across its UK portfolios in a bid to capture returns in what it sees as a strong growth area.
Tim Gregory, head of UK large cap-retail at Gartmore, said that the media sector has joined telecoms, support services and IT among the main overweight positions designed to deliver growth in the group's UK portfolios. Gartmore was previously underweight in media stocks, particularly content providers, but has moved to an overweight position this year by buying into stocks such as Reuters.
The move has been fuelled by developments including link-ups between media and technology companies such as the AOL/Time Warner deal, with internet companies realising that they need content if they are to add value with website technology. Gartmore runs its UK funds including UK Growth, UK Select Opportunities and UK Growth & Income off the same model determining overweight and underweight sector positions.
Gregory said: "Our focus is towards companies which can deliver sustainable positive earnings surprises. Due to the economic environment, the key has been to focus on those areas of the economy that are not dependent on inflation and cyclical recovery to generate earnings surprise. These sectors include IT, telecoms and support services where we are overweight and have been for a long time and, more recently, media content and advertising. We have got stocks including BSkyB, Reuters and WPP.
"We were slow to spot that internet companies need content to be successful. There will be more deals like the AOL/Time Warner merger in the future. We have bought into companies such as Carlton Communications and Informer, publishers of Lloyd's List."
Gartmore's UK portfolios are underweight financials with the markets tending to de-rate many of the banks in the belief that they cannot continue to deliver high returns. Gregory said that the internet and new entrants formed a competitive threat to the banks, putting pressure on margins.
He added: "There are large amounts of investment going into e-commerce. The banks will be spending huge amounts so that they can supply their customers over the internet. This is more good news for IT stocks and more bad news for banks."
Gartmore is also underweight areas including non-cyclical consumer goods such as food retailing and pharmaceuticals in its UK funds. Gregory said that food retailers were suffering from a lack of pricing power and were having to spend large amounts on advertising. Gregory does hold Tesco, which he said is benefiting from a well-executed internet strategy. He believes it will be successful in its moves to expand into Eastern Europe and the Far East.
Gartmore UK Growth is ranked 58 out of 224 funds over three years in the UK All Companies sector on growth of 49.2%, on an offer to bid with net income reinvested basis. The fund is 58 out of 257 over one year on growth of 15%. Gartmore UK Growth & Income has an frA rating and is seventh out of 86 over three years on growth of 41.6% and is eighth out of 88 over one year on growth of 3.6%.
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