Framlington UK Select Opportunities manager has increased large caps from 0% to 12%
Manager Nigel Thomas has increased the weighting of FTSE 100 stocks in his Framlington UK Select Opportunities fund from 0% to 12% since taking over the portfolio in September 2002.
This exposure is likely to increase further over time, he said, with the ultimate aim of having one-third of the fund invested in such companies.
While Thomas generally aims to add value through bottom-up stock from outside the FTSE 100, he believes a multi-cap portfolio is the best way to achieve long-term capital appreciation.
At present, Thomas is buying FTSE 100 companies that are dominant in their particular industry or business sub-sector, which he said gives them more pricing power.
Since taking over the Framlington Capital Trust, renamed Select Opportunities, Thomas has reduced the fund's holdings from 120 to 76, with the target of holding between 60 and 70.
While he continues to tinker with the fund, Thomas said its reconstruction is complete and it is more a matter of positioning and taking advantage of stockpicking rather than asset allocation.
Companies Thomas sees as having a dominant position within the index include Centrica, which he believes is re-establishing its gas monopoly, BSkyB, which he believes is wholly dominant in the digital TV area, as well as BT, Vodafone and ICI, which he feels are fairly cyclical.
While Thomas does not see deflation as a problem in the UK, he believes it will continue to affect the service sector and is therefore moving the portfolio towards natural resources and hard assets, with some cyclical and industrial plays.
He said: 'I have been increasing the small oil and gas content of the portfolio because some good discounts to NAV are available and there are some great possibilities to enhance NAV. I also like the telecoms sector, which may be a better performer this year and next having been through quite a bear phase.'
Although both BT and Vodafone are dominant in the sector, Thomas is looking at smaller holdings such as Cable & Wireless and Kingston Communications.
While many fund managers are pessimistic about the outlook for the consumer, he believes some niche retailers such as Topps Tiles, Ottakers Bookstores and Merchant Retail, which owns the Perfume Shop, can do very well even in a flattish consumer environment.
He said: 'I am not getting too gloomy about the consumer. I can see consumption coming down but, at the micro level, it is still possible to find individual niche retailers that can prosper.
'It happened in the early 1990s, even when we had 15% interest rates.'
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