The SocGen UK Growth unit trust has been building up its weighting in medium-sized companies. Fund m...
The SocGen UK Growth unit trust has been building up its weighting in medium-sized companies.
Fund manager Peter Seabrook has increased his exposure to the FTSE Mid-250 to 24% of the portfolio from 18% in March. The increase has been partly prompted by acquisitions in the building and transport sectors. Among the stocks he has been including are Meyer, Wolsely and FirstGroup.
The move has been prompted by the better than expected prospects for the UK economy.
Seabrook said: "On the face of it, the UK economy looks very good with rising growth and negligible inflation. Corporate balance sheets are robust and earnings should rise by 6% in real terms next year. Dividend growth remains ahead of earnings and corporate activity will continue.
Seabrook has also been building up his weighting to small caps. The portfolio, which picks stocks from the FTSE 350, now has a 4% exposure to small caps, up from 2% in June.
Total exposure to the FTSE 100 is coming down as a result of the growing mid and small cap weightings. It is now 6% lower than the June figure of some 72.
Although encouraging economic and corporate news is partially offset by market concerns of higher interest rates in the US, Seabrook expects corporate activity will remain at a high level and will surprise many investors.
He said: "The market will be driven by the improving fundamentals coupled with the higher demand than supply.
Seabrook is also looking to invest in several sectors that he describes as "mature and unexciting" such as the food and retail sectors.
He said: "There are several genuine growth sectors where stock selection is the key, for example pharmaceuticals, IT, support services, telecoms and media. There are also some value sectors where earnings either need to recover or structural corporate change is required such as engineers and construction.
He favours transport, support services, selected cyclicals, commercial banks, construction and insurance sectors which are set to benefit from the healthier UK economy but has reduced its allocation towards pharmaceuticals which are affected more by global conditions.
The portfolio holds between 40 and 50 stocks. The top 10 holdings make up some 33.7% of the fund. The largest five are BP Amoco with a 4.5% weighting, BT with 4.2%, Shell at 3.9%, Glaxo Wellcome at 3.3% and Vodafone at 3.3.
The 10 largest individual stocks bets in the portfolio are Wassall, Stagecoach, P&O and Weir Group, each with a 1.9% portfolio weighting, RBS, Hays, Rio Tinto, Royal & SunAlliance, each with a 1.8% weighting and Lasmo with a 1.7% portfolio exposure.
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