Two of the most defensive sectors within the FTSE All-Share, beverages and tobacco, have been among ...
Two of the most defensive sectors within the FTSE All-Share, beverages and tobacco, have been among the top 10 best performing sectors for the year to date.
The tobacco sector, comprised of only three companies, Gallaher Group, Imperial Tobacco and British American Tobacco, was the top performer, posting a 22.03% return for the year to 6 November. Beverages was ranked ninth, with a return of -4.99%.
Only three other sectors within the All-Share achieved a positive return over the same period. These were personal care & household products, food production & processing and forestry & paper.
Most of the negative performance in the beverages sector came from Bulmer, which posted -71.61% over the year to 6 November. The remaining companies in the sector, Allied Domecq, Barr, Diageo, Sabmiller and Scottish & Newcastle, also posted negative returns but these were all less than 10%.
Both the tobacco and beverages sectors outperformed the All-Share as a whole, with tobacco beating the index by 53.47% and beverages by 21.24%.
Scott McKenzie, fund manager on the Norwich UK Equity Income fund, has started to take profits and look elsewhere for gains as a result of the sectors' performance.
Shares in companies in these sectors held up in a falling market, he says, but the stock market is starting to pick up so he has begun moving towards more risky stocks in order to realise gains.
'Come a recovery, these sectors will lag in performance as investors will be looking for more cyclical stocks that are expected to perform better in a rising market,' McKenzie says.
He has reduced his Diageo holding from around 3% of the fund to 0.7% and trimmed back positions in the other brewers. Scottish & Newcastle now makes up less than 1% of the fund, along with Sabmiller.
One exception is Allied Domecq, in which McKenzie has been buying stock because he believes it has been rebuilding its reputation. Holdings in the company have been brought up to around 1.5% of the fund.
Tobacco stocks McKenzie likes include Gallaher, which he feels has been an excellent performer and is a potential takeover target.
Anne McCreadie, investment manager at Britannic, picks out Diageo as a stellar performer, mostly because of its bottled beverage Smirnoff Ice, which has been a marketing success.
Diageo and Allied Domecq feature across the Britannic portfolios, although, as a whole, Britannic has a neutral exposure to the beverage sector.
For the public house industry, which sits within the leisure sector, the main story has been the performance of chain pubs such as JD Wetherspoon and Enterprise, according to McCreadie. These two chains are her favourites as they both have good management. Enterprise in particular, she says, has proven it can acquire assets and integrate them into its existing estate.
Overall, the summer was disappointing for pubs, with factors such as the wet weather and rising unemployment within the City of London having a debilitating effect, she believes.
Stocks in the sector are defensive.
Possible takeover targets.
Negative performance of beverage sector.
Tobacco and beverages will lag in a recovery.
Managers starting to move into other sectors.
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till