By Leo Bland The Jupiter Primadona Growth investment trust is overweighting undervalued areas of th...
By Leo Bland
The Jupiter Primadona Growth investment trust is overweighting undervalued areas of the market, including transport and engineering stocks.
The fund, which is managed by Adrian Paterson, has around 80% invested in the UK, with the remainder of the portfolio invested in Japan, the Far East and Europe.
Paterson is responsible for selection in the UK element of the portfolio, with the stock selection in the international element sub-contracted to other Jupiter or external fund managers.
Paterson said: "I tend to have a core of quite solid, blue chip stocks and also include some more exciting special situations or smaller-cap ideas.
"People think the trust is a smaller-cap fund but it is not and I do not want it to be. If one looks at company performance over the past 10 years the spectacular returns have tended to come from the small-cap area but I am also looking for large cap companies which can grow by 50% to 70%."
Paterson is running a portfolio of around 70 stocks for the UK portion of the investment trust. He has around 8% of the whole fund in construction and building stocks and around 7.5% in engineers.
He said these stocks are attractive because of the size of the valuation gap between old economy and new economy sectors.
Paterson is keen on transport stocks such as Arriva on a valuation basis, and added that this type of stock is highly cash generative.
He favours the UK insurance sector where he believes there will be a strong cyclical upswing.
He added: "I am not interested in investing in companies on P/Es of 100 and there are a lot of those out there. I will look towards the smaller-cap end and will go down to companies with a market cap of £10m if I think the company is good enough."
Paterson is keen on P&O which plans to demerge its cruising business, which he sees as a strong growth area. He has also benefited from his holdings in British Gas and Centrica. He said Centrica is flourishing as a service company after being demerged from British Gas. Paterson is keen on British Gas as well, as it is splitting into a distribution business and an oil and exploration operation.
He said that such restructuring moves tend to make the value in an operation clearer to the market and can lead to upgrades.
The overseas element of the portfolio includes 5% in Japan, 5% in the Pacific and 10% in Europe.
The investment trust's European exposure includes a holding in Jupiter European Special Situations, managed by Richard Pease. The fund's Japanese holdings include positions in the Perpetual Japanese and Atlantis Japan Growth investment trusts.
Jupiter Primadona Growth is ranked fourth out of 20 investment trusts in the Growth sector over three years on growth of 132.7%, on a mid to mid basis to 6 September.
It is 18 out of 21 over one year on growth of 18.8% and is 11 out of 22 over three months on growth of 15%, on a mid to mid basis.
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