Fidelity UK Aggressive fund manager Aruna Karunathilake has urged investors not to shun the UK equity market during the current high-inflation period, expecting many companies to profit from rising prices.
While July's 4.4% inflation level is likely to have had a negative impact on investor confidence, Karunathilake says he identified three areas of the market insulated against rising prices.
He believes defensive stocks, which have revenues linked to inflation or the ability to pass on higher rises to their customers, are likely to perform well in the current environment. Karunathilake says National Grid and Tesco, both top 10 holdings in his fund, are good defensive examples.
The UK Aggressive manager is also keen on stocks benefiting from the resources boom, with Royal Dutch Shell the fund’s largest holding.
Karunathilake also highlighted less obvious beneficiaries of rising prices, with companies such as fertiliser producers linked to the higher food costs.
“Inflation – or more precisely, people’s perceptions that prices are rising much faster – is likely to cast its shadow over economies and markets for some time to come,” Karunathilake says.
“Yet UK equity investors can not only protect themselves from higher prices, but also seek to profit from them.”IFAonline
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From 1 March