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AAA-rated Dean: the cyclical stocks I’ve been buying
Markets
by Emma Dunkley on Jun 11, 2012 at 13:58
Julie Dean, manager of the Cazenove UK Opportunities fund, has taken profits in defensive stocks and is buying certain cyclical companies on the back of attractive pricing.
The Citywire AAA-rated manager said cyclically-oriented stocks have fallen sharply because the US market has stopped surprising on the upside recently.
She said: ‘So we think some of these riskier assets offer a better risk-reward profile than they did, also in the event that there could be further policy reaction.’
Dean has taken profits and exited positions in certain defensive companies that have performed well, as earnings multiples in these areas are also relatively high.
‘We’ve sold Compass Group, Tate and Lyle, and SAB Miller,’ said Dean. ‘We’ve completely sold out of these. We’ve taken that capital and said “do we think there are better opportunities in the more cyclical and value end?”’
With these profits, Dean has increased her exposure to fund groups, adding to Jupiter and buying Schroders.
‘We’ve started buying domestic banks – a small amount of Barclays and Lloyds,’ said Dean.
She said she has also started to buy International Consolidated Airlines, which was trading at around £1.80 due to concerns that Bankia had a stake in the firm. However, as Dean explained, oil prices have come down while passenger demand is still robust, supporting its risk-return profile.
Dean urged that, in current markets, paying too much attention to index levels can make you less aware of the dispersions at an individual stock level.
For example, in May, while UK indexes had fallen, defensives performed strongly with media telecoms up over 9%, while the weakest sectors were down around 11%. ‘So high dispersions in returns present opportunity,’ added Dean.
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