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Kames Ethical Equity
Kames Ethical Equity fund manager Audrey Ryan is sticking with businesses with strong free cash flow to ride out the current low growth, low income economic environment.
Search for income in low growth environment
‘We are looking to companies with the potential to increase the cash they return to the market through improved dividends or share buybacks,’ she said.
Such companies include kitchen and building materials supplier Howden Joinery, which Ryan said was doing well on the back of rising consumer confidence and the willingness for homeowners to undertake major household projects.
Other strong dividend providers in the portfolio include media company ITV and price comparison website business MoneySupermarket.com.
Housing and financials plays
Building on her housing theme, Ryan is positive on house builders Bellway and Taylor Wimpey, soft furnishing company Dunelm – a longstanding holding in the fund – and online real estate portal Rightmove.
Despite having no banks in the portfolio due to the fund’s ethical screening process, Ryan accesses the UK financials sector through a diverse mix of companies such as insurer Prudential and financial services firm Hargreaves Lansdown, as well as asset manager Schroders and loans provider Paragon.
Other domestic plays include funeral services provider Dignity, which acquired rival business Yew earlier this year, Thomas Cook, which is improving on its previous poor management by further streamlining its costs, and fellow travel agents Tui Travel. Whitbread, owner of the Premium Inn and Costa franchises is another key holding in the fund.
In addition to Thomas Cook, another company which fulfils Ryan’s ‘self-help’ criteria is machine rental company Lavendon.
‘Lavendon is a cherry-picker with UK, European and Middle Eastern exposure, focused on improving return and margin,’ she said.
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- Fenner PLC (FENR.L)
- Telecity Group PLC (TCY.L)
- Aggreko PLC (AGGK.L)
- Bodycote PLC (BOY.L)
- Vodafone Group PLC (VOD.L)
- Legal & General Group PLC (LGEN.L)
- Prudential PLC (PRU.L)
- Dunelm Group PLC (DNLM.L)
- Intertek Group PLC (ITRK.L)
- Taylor Wimpey PLC (TW.L)
- Bellway PLC (BWY.L)
- Rightmove PLC (RMV.L)
- Hargreaves Lansdown PLC (HRGV.L)
- Amlin PLC (AML.L)
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