Stewart Ivory has positioned its pension funds toward Asia, Japan and Europe and is underweight in t...
Stewart Ivory has positioned its pension funds toward Asia, Japan and Europe and is underweight in the UK and US.
Stewart Ivory manages 11 segregated portfolios in the UK, totalling £243m and 15 international portfolios, totalling £705m.
Teddy Tulloch, investment policy director, at Stewart Ivory, said these portfolios are overweight in both Europe and Asia to capitalise on the theme of economic recovery. He added that although the Europe has already recovered strongly, he is confident that steady, albeit slower growth will continue, particularly in smaller economies.
He said: "In Japan we are not so much playing a theme of economic recovery but a theme of recovering profitability. We believe that the companies that are restructuring and reorganising will achieve good returns on assets. It is not so much about the economy per se, but the fact Japan has a lot of good companies which are becoming more efficient."
The negative position in the US is based on Tulloch's belief the market is overvalued and his concern about a pending correction on Wall Street.
Tulloch said he is also underweight the UK as the economy has recovered more than the rest of Europe, and the market is very sensitive to developments on Wall Street.
Major themes within the portfolios include telecoms and technology, with the exception of North America. He said: "These sectors have less scope for growth in North America than elsewhere."
Another of Tulloch's themes is to steer away from companies likely to be hurt by the growth of the internet.
He said: "We aim to identify those companies which are beneficiaries of the internet but it is also important to avoid the losers, whose business will suffer from a lack of pricing power and competition brought about by the internet." Key holdings include Fresenius, the German manufacturer of kidney dialysis machines. Fresenius has a growth rate of 20%, and a P/E ratio of less than 20 times earnings.
Tulloch said this represents good value, amid a somewhat overpriced technology sector.
He added: "I also like Luxottica, a spectacle frame maker in Italy which is set to grow by 25% with a P/E ratio of 20 times earnings. It has a very high profit margin of 40% and recently acquired the US company RayBan.
"A preferred Hong Kong-listed stock is Huaneng Power, which owns China's largest power-producing company. This company owns 10 power stations in China but has the power to expand and diversify into other regions, which is something its competitors are unlikely to do."
Tulloch said: "Earlier this year we had quite a poor first quarter when the market went very much for cyclical and industrial shares while we favoured growth stocks. The market has moved away from those cyclical sectors now and our theme of growth stocks is coming through strongly."
Improving portfolio diversification
Hanging on the telephone
German recession concerns