By James Thorneley UK Discovery Trust, managed by Friends Ivory & Sime, is trimming its exposure to ...
By James Thorneley
UK Discovery Trust, managed by Friends Ivory & Sime, is trimming its exposure to technology in anticipation of a slowdown in the sector.
Instead Glen Nimmo, manager of the £60m trust which invests in companies with market caps below £50m at the date of initial investment, is to increase the portfolio's exposure to media and leisure stocks.
He said: "We saw the best performance of these tech stocks last year although the corporate performance of these companies will continue and over the short term the rate of growth in the share price will fall, in the sense that the earnings growth which will be achieved this year is already priced into the market. On a three year view technology stocks still look attractive."
Already Nimmo has reduced the portfolio's exposure in Robotic Technology Systems from 4.1% to 3.9%. The trust already had exposure to the company when he took over in April 1997 from John Dodd. Dodd initially bought shares at 40p and Nimmo increased the weighting by buying stock at 70p. Shares in the company are now priced around 600p.
The profit taken from the sale of some of the trust's technology stocks will be re-invested in media and leisure.
The portfolio has had little exposure to media stocks which was one reason why Julia Clarke was recruited from Stewart Ivory at the end of last year. Nimmo said one of Clarke's responsibilities on the group's smaller companies desk will be to focus on the media sector.
In the leisure area Nimmo believes consumers are becoming more sophisticated in their tastes and are moving away from the MacDonalds and Burger King chains. He said: "Increasingly people are getting into Thai and Japanese food. Late last year I bought into Oriental Restaurants at 126p, the price is now 180p." As at the end of November 1999 the portfolio's largest sector allocation was cyclical services with a portfolio weighting of 34.5%. This is followed by information technology and general industrials with weightings of 19.6% and 14.7% respectively.
Over three years to 15 December the trust under performed the Micropal Smaller Companies UK peer group. During the period it is ranked 15 out of 32 with its share price rising by 57.1% compared to an average rise of 65.2%. As at close of business last Wednesday the trust was trading on a 20.1% discount to NAV.
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