Group is reducing holdings across the European fund range to concentrate on best ideas
Martin Currie has taken a more aggressive stance across its European fund range, reducing the number of stocks to make the portfolios more concentrated.
Dino Fuschillo, manager of Martin Currie European, has trimmed the number of holdings in the Oeic sub-fund to 39 from the 53 he inherited on taking over the portfolio in mid-May, with the top 10 holdings now comprising 32% of the fund.
The Fuschillo-managed Martin Currie European Investment Trust has undergone a similar concentration of holdings.
Given the recent volatility in European markets, which has seen the Europe ex-UK sector fall by 18.61% over the month to 26 July alone, Fuschillo is keen to focus on the group's best ideas.
He said: 'Where some of the holdings I inherited were not ones of great conviction, I either sold out of them or added to the positions and focused on where I still find stocks attractive.
'The portfolio had 53 stocks and it is now down to 39, the top end of the 30-40 range I am targeting.'
Many of the changes reflect the extent to which the valuations of certain sectors have been beaten down and Fuschillo has maintained the fund's large-cap bias.
Looking forward, he is cautiously optimistic on the direction of European markets and expects the number of positive earnings surprises to outweigh the negatives over the remainder of the reporting season.
He added: 'At these levels, I expect the markets to move with a sensible trading range, within which we can build growth.
'On balance, I think the markets will move up by the end of the year.'
While Fuschillo has not yet been tempted back into the beaten-down technology sector, he has bought back into telecoms.
He said: 'In the space of three months, the market is down almost 25%. Within that, there have been even steeper declines in some sectors and everything has been derated to valuations not seen since the late 1980s.
'I bought back into telecoms, predominantly fixed-line operators such as Telefonica, Telecom Italia and even TIM. They have had a tremendous bounce-back in the past six weeks and we are now entering a clear era of free cashflow generation.'
Fuschillo added that in the past quarter, Spanish telecoms group, Telefonica, in what he deemed a positive move, gave up its German 3G mobile licence and took an $8.4bn one-off write-off, rather than pump more money into the technology sector with little chance of generating profit from it.
This may prompt similar moves in the market and could help restore confidence in the sector and the wider market, he said.
He has also bought into food retailer Ahold, after the group's Argentinian operation defaulted, beating down the valuation to a single digit P/E. Fuschillo said this is now more than factored into the price and the stock is as much a play on the US consumer, given its overseas' exposure.
Elsewhere, Fuschillo has been adding to his weightings in both the banking and business services sectors as a play on improving macro factors and corporate profitability.
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