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F&C’s Stanley: UK small caps are in middle of perfect storm
by Eleanor Lawrie on Jul 09, 2014 at 11:17
One business the fund did decide to invest in was Cambian Group, which provides rehabilitation centres for adults and children largely off the back of NHS referrals.
Stanley said she was heartened by the fact the business has very strong clinical outcomes relative to the NHS, with a management team that has been in the field for a decade and made themselves very accountable.
She said that while Cambian was ‘not a bargain’, it is a high growth stock. Other IPOs, particularly in retail, looked expensive.
The IPO market could be set to quieten down over the next few months and Stanley suggested we ‘absolutely need to have a pause’ to see where markets are at the end of the summer.
She also noted that a few placings have already been scrapped as investors ‘ran out of cash and appetite’.
Awaiting Q2 results
A common concern for investment managers at the moment is whether companies’ second quarter earnings will come through to justify their rerating, after figures for the first quarter disappointed.
But Stanley noted one positive from the recent volatility is that the stretch in valuations has become less severe.
Looking ahead, the manager said there could be some issues around potential interest rate rises although she is not unduly worried. ‘Obviously there is the interest rate rise issue and the timing of that but we are hoping we have talked about it so much it will be a non-event,’ she said.
‘Sectors like housebuilders could take a hit, but the housing shortage will still be there,’ she added.
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