Jupiter's De Fonclare buys UBS but remains wary on banks
The Citywire A-rated manager likes the Swiss bank's prospects but he remains underweight on Europe's financial sector.
by Matthew Goodburn on Dec 06, 2012 at 15:43
Citywire Top 1000 manager de Fonclare remains underweight banks across all of his funds but Swiss bank UBS is now his largest holding, after he started buying three months ago.
It makes up 3.3% of his European Opportunities fund, and he decided to buy into the bank after it made changes to its business model to reduce systemic risks.
The new position was partly financed after de Fonclare sold a near 2% stake in oil services stock Fugro on corporate governance concerns when the group suddenly fired its chief executive and changed business strategy.
'I have been underweight financials for some time, but always look for the best companies in any category. I have bought UBS since it changed its business model to focus on wealth management and to reduce its investment banking operations.'
Overall, faced with the long term low growth environment and ongoing concerns over sovereign debt and a potential eurozone break-up, de Fonclare is continuing to avoid peripheral Europe and concentrate on Europe's strongest economies, with overweight positions in Switzerland, Germany and the Nordic region.
'I am a pure stock picker but you have to take the macro picture into account so a common theme is to steer clear of political issues in Europe while capturing international growth. This has been how I have positioned my funds for the past two years and I don't see the political risks decreasing.'
Banking and telco concerns
De Fonclare has particular concerns over risks to the banking and telecoms sectors and is looking for stocks that go 'under the radar' of politicians looking to raise tax take to help struggling economies.
'We don't have any eurozone banks and favour private banks over retail banks because [retail banks] have too much exposure to Greek and Italian debt. Retail banking in France will be very dull for many years and these are the most volatile stocks.'
He is keeping a diversified portfolio of stocks which he believes can generate growth above GDP, with low volatility and strong balance sheets.
De Fonclare's focus on stocks which can access relatively stronger emerging market growth is crucial and he cites tyre maker Nokian as a key holding.
'Nokian has major exposure to the Russian market and has a huge winter tyre business. It is very hard to import such products from China so access to its local market is crucial. It has a combination of the right brand and the right strategy to generate strong growth over a long time and it also has virtually no debt.'
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