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Burberry's a cut above the rest, says Mark Urquhart
Mark Urquhart, manager of the Edinburgh Worldwide investment trust, runs through some of his top stock picks for the year ahead.
Mark Urquhart, manager of the Edinburgh Worldwide investment trust, a pick of Citywire Selection, explains why he still thinks Burberry's a winner.
Burberry: online presence and male buyers
In December, Urquhart bought a 2% stake in luxury brand retailer Burberry (BRBY.L) after it was sold off savagely on fears over a global growth slowdown. He also added a 1.7% stake in temporary power provider Aggreko (AGGK.L).
Urquhart said that Burberry was differentiated from other luxury brands by its slick online trading platform and the number of male buyers it attracts.
'It plays into our growing high-end consumption theme and was very weak in November and December, although trading has remained very strong. It has a larger male sales base than its peers, and has gone for it digitally through online platforms such as Facebook,' he said. 'In the UK it may not be seen as particularly trendy, but in Asia it plays into the "Cool Britannia" trend.'
Similarly, Agrekko was added after Urquhart said it had been beaten up on worries that European sovereign debt contagion would hurt global growth. 'Frontier markets are building power grids, and Agrekko is well plugged into some of the more remote areas in Africa and Asia,' he said.
Urquhart said it had become more attractive as some of its temporary power rivals were backing away from the sector because of its high barriers to entry. 'It is operating in South Africa and Namibia and while the kit is not complex, the logistics of getting it to the right place is.'
Venturing into Japan
Online gaming firm Gree is Urquhart's first foray into the Japanese market. 'It is very involved in social gaming and has a very strong platform, which it is expanding into other Asian markets. It got very beaten up at the end of last year as there were fears of regulatory pressure on online gambling stocks, but it is a pure gaming stock,' he said.
Urquhart funded all three new purchases by selling out of his positions in pharmaceutical firm Teva and solar power specialist First Solar. He admitted that he should have sold out of the latter stock 'a lot earlier'. 'We expected the alternative energy market to do well, but the price of solar cells has collapsed and the firm has had a lot of management changes.'
The decison to sell out of Teva was based on a longer-term view that generic drug penetration in its key US market has reached around 75%, so there are now more limited opportunities for long-term growth.
North American bias
Some 40% of the £185 million trust's portfolio remains in North American stocks, and tech stocks in particular dominate the core holdings.
The largest holding is currently Apple at 7.5% of the trust, while Amazon is around 6.5% and eBay contributes around 4.1%. 'There is no sense of a crisis in California, and they are seeing start-up tech firms every week using tablet technology. Apple sold three million iPad 3 tablets in the first weekend alone,' he said.
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