View the article online at http://citywire.co.uk/money/article/a586967
Edward Legget: the UK stocks I'm buying now
Edward Legget, a Citywire AAA-rated fund manager, has given investors impressive, but hugely volatile, returns. He reveals the stocks he's been buying recently.
Tumbling share prices and swings in the market have made many investors wary of pouring money into stocks. However, the volatility has also provided an opportunity for the less faint-hearted to snap up some stocks as they hit the bottom.
Edward Legget, the Citywire AAA-rated manager of the Standard Life UK Equity Unconstrained fund, a Citywire Selection pick, is one such. Legget, whose top 10 stocks in this fund, contribute to Citywire Top Stocks increased his holdings in certain stocks during last year's mayhem. As a result he has more than 40% of the fund in the industrial sector.
‘Over the last three to four years you’ve seen a number of significant occasions when people are selling or buying on fear as opposed to looking at the trends within companies and what companies are doing, and those occasions provide opportunities,' he says.
‘Obviously, it’s great if you’re positioned for when sentiment turns either way, but when those opportunities arise we try to take them. We added significantly to Bodycote (BOY.L), Cookson (CKSN.L), Spectris (SXS.L) and bits of IMI (IMI.L) and GKN (GKN.L) through that period.
‘We sold Vodafone (VOD.L) on the other side, and recent additions to the fund have been RSA Insurance (RSA.L), which in terms of insurance pricing we think is pretty close to the bottom. In the same space we bought Lancashire (LRE.L) three months ago, which is a specialist insurance company.’
Legget also oversees the Standard Life UK Equity High Alpha fund, which has given returns of 143.4% over the past three years, compared with the FTSE All-Share's total return of 67.9%. The UK Equity Unconstrained fund has generated returns of 177.7% over the same period.
‘The sector in general is a good success story for quoted UK companies, and one we’ve been heavily overweight for some time... that has been very profitable for the fund,' he says. 'I buy things which are out of favour which may remain out of favour for many months. It’s difficult to corner the exact turn in these stocks, but you won’t be able to buy them when they do turn because they’ll move very quickly.
‘Industrials are making significant amounts of sales into emerging markets, either directly or indirectly through goods manufactured in Germany being sold into China or in terms of goods manufactured in China for China and India and other places.’
Some of the stocks Legget has been looking to for this are housebuilders, even though with house prices falling and the UK economy under threat, the choice might seem like a strange one. However, Legget says he’s looking to companies in subdued markets, which can benefit from a turn in sentiment.
'New-build housing volumes are down 40-50% from peak, but the number of participants building houses is also down significantly as small housebuilders struggle for financing. So the remaining ones are actually seeing a fairly sharp recovery in profits. To that end we own Galliford Try (GFRD.L), which has been a fantastic performer over the last 18 to 24 months. They’ve bought a lot of land in London and the South East post the crisis and have been building and generating very strong returns.
‘We also, more recently, have bought Taylor Wimpey (TW.L). Again it has seen a similar story, with very few housebuilders actively buying land as land is relatively cheaper than house prices. Hence it’s an industry which is seeing a strong rebound in profitability in what remains a pretty subdued market. Elsewhere, Howden Joinery (HWDN.L) has been a long-term holding in the portfolio, taking market share from weaker competitors as they’re the largest supplier of kitchens in the UK.’
However, the fund had a hard time at the end of last year, and its concentration in industrials, away from big stocks such as GlaxoSmithKline (GSK.L), saw the portfolio slide.
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In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.
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Look up the shares
- Bodycote PLC (BOY.L)
- Cookson Group PLC (CKSN.L)
- Spectris PLC (SXS.L)
- IMI PLC (IMI.L)
- GKN PLC (GKN.L)
- Vodafone Group PLC (VOD.L)
- RSA Insurance Group PLC (RSA.L)
- Lancashire Holdings Ltd (LRE.L)
- Galliford Try PLC (GFRD.L)
- Taylor Wimpey PLC (TW.L)
- Howden Joinery Group PLC (HWDN.L)
- GlaxoSmithKline PLC (GSK.L)
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