fund manager tim steer is looking to buy into video games and building companies
New Star's forthcoming UK Aggressive Fund will rely on balance sheet analysis to underpin the stockpicking style of manager Tim Steer.
The Oeic fund will be on a fixed offer price of 50p per share from 22 October to 9 November.
Steer, formerly head of small and mid cap pan European research at Merrill Lynch, believes close scrutiny of balance sheets can provide him with the necessary information to avoid poor businesses and buy into potential winners.
He said: 'Over the next year investors need to be in companies with corporate soundness. These are stocks with cash on their balance sheets or the ability to generate cash. It is in the balance sheets that you find potential problems which exist.'
Steer is looking to run a portfolio of some 40 stocks with an annual turnover of up to 100%. In present market conditions he is stressing the need to look for businesses which are recession proof such as suppliers to the health and education services or those involved in the private finance initiative. He also likes building and materials companies.
'The market is going to be looking at these stocks in a major way and I think they will be re-rated,' said Steer.
As a rule of thumb Steer will not look to buy companies with a P/E above 16 times but believes this still leaves him with plenty of scope to buy into growth plays, many of which he describes as, 'not very expensive at the moment', such as the video game market.
He said: 'This is now a bigger market than recorded music in the Western World. More and more people are playing these games. There is going to be mamouth spending by Sony, Microsoft and Nintendo to push their platforms forward.'
The areas of the market he is looking to avoid are tech, media and telecoms, even though many of these stocks have seen their valuations slashed since March 2000.
Steer will run a predominantly mid-cap portfolio benchmarked against the FTSE Mid 250.
He believes FTSE 100 businesses are too much geared to macro economic and political news, much of which is almost impossible to predict, and balance sheet analysis is far more difficult.
By contrast he feels mid and small caps are exposed to the domestic market, are easier to get to know and analyse and it is simpler to judge how a business will move against its own market.
Steer has not managed a fund before. He pointed to his experience of working as an analyst contacting the likes of Schroders' Andy Brough, Edinburgh's Alistair Currie and Ross Hollyman of JP Morgan Flemings.
'I know these people very well and have been part and parcel of the way they run their money,' he added.
The fund is a subfund of New Star's Oeic umbrella. Its retail share class will have an initial fee of 5.25% and an annual of 1.5%. This pays out 3% upfront commission and 0.5% renewal through the Oeic, Isa or Pep. Minimum investment starts at £1,000. The institutional share class, with a minimum investment of £500,000, has no initial charge and an annual fee of 1%.
'Asleep at the wheel'
Nomination deadline - 28 June 2019
Tactical opportunities will arise
Multi-asset funds saw £7.9 billion in net retail sales in 2018, sparked by a heightened awareness of risk, following a resurgence in volatility. Scottish Widows examines the appeal of this approach.
What made financial headlines over the weekend?