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Bill Mott's big 4 themes: pharma, banks, miners and oils
The income veteran highlights the major sector calls that are set to shape the performance of his fund over the coming months.
He says there is a 25% chance of inflation spiking as policymakers ‘oversteer the ship’ in an attempt to avoid a Japan-style deflationary environment, which he ranks as a 15% risk.
Against this backdrop he is continuing to favour defensive holdings in large companies, which have fallen out of favour in recent months as last year’s underperformers – small firms and 'cyclicals', meaning stocks whose performance is closely tied to the wider economy – outperformed in the first half of the year.
‘The best we thing we can hope for is anaemic growth,’ he says. ‘The imbalances of the global economy mean it is simply impossible for us to see a synchronised recovery – at least without a significant burst of inflation – so we are sticking with our overall cautious view.’
Mott is playing four key themes in his £385.7 million fund in the face of faltering growth.
Mott says a number of factors will power the performance of the pharmaceutical sector over the coming years, and he is more than double weight the index at 17.4% compared with the FTSE’s 7.4%.
‘Not only is this sector relatively immune to overall economic activity, but we think we are at an inflection point in how the industry is thinking about returns on the investments they make,’ he says. ‘Also, the sector is now being priced as if new product development is going to be extremely scarce, but that progress in biologics means there are actually exciting prospects for new therapies.’
Key holdings include a 6.8% position in GlaxoSmithKline (GSK.L), 3.2% in AstraZeneca (AZN.L) and a number of overseas holdings, including Roche, Bristol-Myers Squibb, Merck & Co, Novartis, Pfizer and Sanofi.
‘We have also been taking the opportunity to build a position in the UK’s Shire Pharmaceuticals (SHP.L) on recent weakness and we now have a 0.6% holding,’ Mott says.
‘As we’ve said before, we see pharmaceuticals as the “new tobacco” and this should herald a multi-year period of good returns for investors.
Mott is 8% underweight the index, with his sole holding in the sector being a 2.1% stake in HSBC (HSBA.L).
‘The very low valuations on a price-to-book basis mean that we continue to keep an interested eye on these stocks, but we retain the view that the sector is stuck between a rock and a hard place,’ he says.
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Look up the shares
- AstraZeneca PLC (AZN.L)
- Merck KGaA (0O14.L)
- Aberdeen Asset Management PLC (ADN.L)
- Schroders PLC (SDR.L)
- Bhp Billiton PLC (BLT.L)
- Rio Tinto PLC (RIO.L)
- Avocet Mining PLC (AVM.L)
- African Barrick Gold PLC (ABGL.L)
- BP PLC (BP.L)
- BG Group PLC (BG.L)
- Total SA (TTAT.L)
- Premier Oil PLC (PMO.L)
- GlaxoSmithKline PLC (GSK.L)
- Shire PLC (SHP.L)
- HSBC Holdings PLC (HSBA.L)
- Barclays PLC (BARC.L)
- Royal Dutch Shell PLC (RDSb.L)
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