UK equities are still attractive despite the more difficult global macroeconomic back drop, accordin...
UK equities are still attractive despite the more difficult global macroeconomic back drop, according to Jacob de Tusch-Lec, manager of the Artemis Capital fund.
Despite the collapsing US housing market, highly indebted US consumer, and rising interest rates, de Tusch-Lec said UK equity valuations are still attractive bar a melt down in earnings.
Corporate balance sheets are still strong and profits and dividends are growing at a healthy rate, he said. The dividend yield of the FTSE All-Share is still above 3% and growth is above its 40-year average. Meanwhile, double digit UK earnings per share remains.
Furthermore, amid falling global growth and fears of a US recession, UK equities could be the place to be. In addition to being in healthy shape, UK equities fare relatively well when risk aversion increases and earnings growth declines. In particular, UK large caps perform well amid a cooling global economy and increase in risk aversion, he said.
The Artemis SmartGarp process, pioneered by European fund manager Philip Wostencroft, is utilised in the Artemis Capital fund. Currently, it is finding opportunities in the banking, mining and utilities sectors.
Utilities held include Centrica, Scottish Power, and Scottish and Southern Energy. "The utilities are delivering strong operational results and as cost of capital remains low, the sector is ripe for more corporate activity,' he said.
A number of holdings have been sold where SmartGarp has become less keen, including British American Tobacco, BHP, Man Group and Aviva.
The largest overweight positions within the fund include Next, CRH, Barclays, Allied Irish and British Airways. key points
UK equities fare well in global slowdown
Attractive valuations and strong balance sheets
Utilities identified as favourable by SmartGarp
BAT, BHP and Aviva recently sold
Nine in 10 do not have income protection
Set to become part of Single Financial Guidance Body
Also plan to scrap NI on contributions
Eight-week high against US dollar
Lower cost option for advisers