Henderson Investors has been reducing its exposure to the technology, media and telecoms in the smal...
Henderson Investors has been reducing its exposure to the technology, media and telecoms in the small cap arena.
Stephen Peak, European fund manager at Henderson Investors, says the group has been cutting the size of its overweight position as these areas are seeing a correction. The Dow Jones Europe Stoxx Technology index has fallen 25.25% in the period between 6 March and 5 April while the Dow Jones Europe Stoxx Telecoms index is down 27.6% over same time period.
Hendersons is looking to take profits rather than sell out completely. Among the businesses where Peak has been trimming positions is German e-commerce software provider Intershop. Its share price peak so far this year has been E695 on 13 March, while its low was E235 on 5 January. As of 5 April it stood at E399. Despite this volatility the stock has grown some 572.47% in the 12 months to 5 April.
In the past three years in Germany the number of new issues has doubled each year and this endless supply is being punished by the market, often because of what is happening in the US.
Peak says: "The lion's share of new issues have been in the dot.com, media and software area and these have been coming along thick and fast. There has been cold water poured on this now with a downturn in sentiment towards the technology sector in Europe.
"The root of this lies in the US as the average European fund manager looks at what the Nasdaq has done. The index has been coming off which has been affecting the ratings of European technology companies."
He adds the market is beginning to focus more strongly on the fundamentals of technology, media and telecoms companies and more selectivity is required for those looking to reap rewards in this sector.
Foreign & Colonial has also been cutting its technology exposure and is instead focusing on security and luxury goods stocks amid its investments in European small caps.
Stephen White, European fund manager at Foreign & Colonial, has investments in stocks such as Swedish security company Securitas as well as Assa Abloy, which makes locks. Assa Abloy saw share price growth in euro terms of 95.37% in 12 months to 5 April and the company saw sales growth of 20% during 1999 with a 26% rise in earnings per share.
White also has holdings in Italian luxury goods business Bulgari, which makes goods such as watches, as a growth play. The firm saw sales growth of 33% during 1999 as well as a 34% increase in profits. Bulgari shares rose 97.81% in the 12 months to 4 April and the stock is now on a P/E of 56.33 times.
Peak has been buying into out of favour small cap stocks which he believes have good growth potential, such as Spanish wine producer Baron de Ley, which is on a P/E of 12.53 times. Baron de Ley shares are down by 30.22% in the 12 months to 5 April.
He is also keen on exposure to the oil services sector, which he believes is set to benefit from increased oil prices. Peak says large oil companies will be looking to boost their investment in oil exploration and development, which should have positive knock on effect.
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