The £20.7m Stewart Ivory European Smaller Companies unit trust is overweight in the electronics sect...
The £20.7m Stewart Ivory European Smaller Companies unit trust is overweight in the electronics sector
The fund is also overweight in machinery and engineering against the HSBC James Capel Smaller European Companies benchmark, although exposure to these areas has been trimmed back from a double index weighting in each sector two years ago
Jimmy Burns, fund manager at Stewart Ivory, said the reduced exposure was in response to the strength of the Swiss and former German currencies, along with recovery in Asia, making these companies less competitive internationally
He said: "We have, however, maintained some exposure to stocks operating in niche markets on the basis of expected earnings growth of between 15% and 20%. The companies we currently own within this sector are those that are competitive on a global scale. An example is Kaba, a locks and security business which uses high technology and is a leader in Europe as well as being competitive in the US and Asia
The overweight position in electronic and electrical companies has followed the listing of several new companies, for example Neopost, a business providing postal equipment and franking machines worldwide
Burns said: "Neopost is in the process of launching a small home and office business on the internet, enabling people to order stamps and stationary through its website
Burns also holds a slightly overweight position in food and beverages, where the German bakery Kamps represents his main stock bet
Major underweight positions are in construction, metals and real estate, as Burns believes these are not growth industries
Investment decisions are based on stock selection, with the focus being on companies with long-term growth potential or offering attractive valuations
He cited Beru, a German auto-business which makes spark plugs, diesel emission systems and alarm sensors, as an example of a good value company with strong growth prospects. Burns added: "This is a company trading on a P/E of eight times earnings, yet is growing at 15% a year. It also holds a strong net cash position in the balance sheet. This stock has the potential to either double or triple in my view
The fund currently has 47 holdings, of which some 58% fall within the £100m to £500m cap range. A further 23.9% fall within the £500m to £1bn range, while 5.1% have a market cap over £1bn. Companies with a market cap at less than £100m represent 7.3% of the fund. The fund is ranked fifth of 21 funds in the European Specialist sector over three months, fifth of 20 funds over one year and 11th of 16 funds over three years
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