M&G's French slashes mining exposure
As commodities prices continue to fall, M&G Global Basics manager Graham French has cut exposure to the battered mining sector. Meanwhile, the A-rated manager has been strengthening his play on emerging market consumer demand.
by Danielle Levy on Oct 24, 2008 at 12:23
A beneficiary of the resources boom over the past few years, M&G Global Basics manager Graham French has cut exposure to basic materials over the past few months and has strengthened his play on the emerging market consumer.
As commodity prices and valuations for miners continue to fall, French (above) has reduced his fund's exposure to basic materials from 40% at the end of May to less than 25% in October. For example, the A-rated manager sold out of Consol Energy, Centennial Coal and Patriot Coal in September.
Meanwhile, French's diversification towards consumer-oriented stocks, which has been underway for more than a year, has gathered pace as the London-based manager has moved out of miners. Over the past few months, the fund's exposure to consumer goods has increased by around 15%. French highlights Yum Brands and Foster's Group as two defensively positioned companies which are also capable of benefiting from higher growth rates in developing economies.
He also highlights US drinks business Constellation Brands as a play on growing demand for alcoholic beverages in emerging countries.
Yet despite his more defensive positioning, French is still bullish on a number of commodities-related stocks. He has been adding to his position in Anglo-African group Lonmin, stressing the value of the company's platinum assets and healthy fundamentals for the platinum market due to supply constraints. He has also increased his fund's position in another top 10 holding, minerals provider Imerys, taking advantage of a share price fall.
Over the three years to the end of September, French has posted a 23.8% return with the Global Basics fund compared to a 16.3% rise in the customised benchmark he follows.
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