BWD Rensburg's UK blue chip and equity income unit trusts have increased their weightings to new eco...
BWD Rensburg's UK blue chip and equity income unit trusts have increased their weightings to new economy sectors as valuations come down.
BWD UK Blue Chip Growth, managed by Colin Morton, has moved to a slightly overweight position from a significantly underweight in the IT hardware sector during November while the fund is neutrally positioned in media, telecoms and technology after having been around 20% underweight in October. BWD UK Equity Income, also managed by Morton, has reduced the size of its underweight position in tech.
Morton has been buying into stocks such as Logica, Baltimore, Misys and CMG which he believes are on more realistic ratings compared with earlier this year. He said that Logica is trading on a P/E of around 35-40 times while the stock was on a P/E of around 100 times six to seven months ago.
He added: "We have never said that we would never buy technology stocks but the valuations were ridiculous earlier in 2000. There is no doubt that the froth has been knocked off many of these stock prices.
"I still believe that the first quarter in the US could see further tech weakness as we have had profit warnings from some PC companies such as Apple and this may have a knock-on effect on chip manufacturers and software manufacturers.
"There is still scope for some of these stocks to fall by 15% to 20% but I believe that they have as much upside potential as downside risk and that is the first time I have seen that in this sector for 12 months."
BWD UK Blue Chip Growth is running with a portfolio of 94 stocks and Morton is also keen on areas such as support services with one of his holdings being Capita.
Morton added: "The other part of the market we are warming to is industrial cyclicals although this is not an area we would want to own on a five year view. It looks more and more likely that interest rates have peaked and it seems that engineering companies and building materials stocks could benefit.
"The management of these types of companies have seen downgrades for their businesses and they are now starting to do something about it in terms of focusing on core activities and looking at realising shareholder value."
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