Gartmore is flying in the face of investors fleeing the US in the wake of the sub-prime fallout by adding American stocks to its portfolios.
In the most striking case, the Bank of America has been added to the firm’s Global Focus and SICAV Global Focus funds’ concentrated list of shares.
The Bank of America, with $1.5trn in assets, is the second-largest bank in the US, covering some 30 states from coast to coast.
Fund manager Neil Rogan says the Bank has been a key player in the US in coming to the aid of one particular company hit by the US struggles – Countrywide Financial.
Rogan says: “As the fallout from US sub-prime problems continues to unnerve international investors, it may seem counterintuitive to add a US financial stock to a portfolio.
“But, in a move that may come to be seen as the cavalry coming to the rescue, Bank of America has used its financial strength to make a $2bn investment in Countrywide Financial, the largest mortgage lender in the US.”
He adds: “Rather than a bailout for Countrywide, the deal constitutes bargain shopping for Bank of America, as Countrywide's shares had almost halved in value amid concerns about a credit crunch in the mortgage industry.
“In particular, the preferred securities snapped up by Bank of America yield 7.25% and can be converted into common stock.
“As a sign of confidence in the future, Bank of America has also recently announced a 14% increase in its own regular quarterly dividend. Consequently, the stock yields nearly 5%, with consensus earnings giving a P/E multiple of 10.2x for the current year.”
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