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JPM's Brittain’s picks to play the high-street recovery
by Robert St George on Oct 04, 2013 at 15:26
JP Morgan's UK small cap ace Georgina Brittain unveils her top high street picks.
Georgina Brittain, who holds a Citywire + rating, has backed the British high street to continue driving her fund’s strong performance.
Over the past year Brittain’s £194 million JPMorgan Mid Cap fund, co-managed with William Meadon, has returned 54% while its benchmark FTSE 250 index has grown by 31%.
In that 12-month period the managers have dramatically boosted their exposure to domestic retailers, moving from a weighting to consumer services in line with the benchmark to becoming almost 50% overweight in the sector.
This has happened despite a succession of reports declaring the demise of the high street: PricewaterhouseCoopers has found that an average of 20 stores a day closed last year, up from 14 a day in 2011; 14% of retail properties are currently vacant.
Brittain and Meadon have nonetheless piled into chains like Sports Direct, with their stake in the company swelling over the past year from £1.8 million to £6.2 million as its share price has climbed by 84%.
Although they have been trimming that position recently to keep their portfolio balanced, Brittain has expressed confidence that Sports Direct still has more to offer.
First, Brittain noted that as consumer confidence improved alongside the economy – especially from a low base – retailers at Sports Direct’s end of the market were well positioned to benefit.
‘If there’s one thing Sports Direct does well, it’s give value for money,’ she commented.
Second, Brittain highlighted that as well as gaining market share in the UK, Sports Direct was actively expanding in Europe too. The group’s international sales increased by 20% to reach £185 million in the year ended 28 April 2013.
Third, Sports Direct’s late emergence online was suggested as an advantage by Brittain. That channel still accounts for only 15% of the firm’s total sales, but they are growing at around 50% a year. ‘Sports Direct had been behind the curve,’ Brittain acknowledged. ‘But that just means the upside is still to come.’
Elsewhere in the retail space, Brittain and Meadon have backed Dixons and Dunelm. In recent weeks they have snapped up 1.55 million more shares in the former, taking their total stake to 6.2 million shares, worth almost £2.9 million. Although the electronics retailer’s share price has more than doubled over the past year, Brittain has not been taking profits just yet.
As well as taking more market share following Comet’s demise, and being lifted by the higher consumer confidence, Dixons has cut both its costs and its prices to remain competitive.
Dunelm is another high-street staple from which Brittain forecasts more growth after a 30% share surge over the past year. ‘People don’t talk about it, but it’s a great rollout story,’ Brittain enthused. Dunelm opened 14 new outlets in the year ended 29 June 2013, and another six should begin trading by Christmas.
Thomas Cook shares have flown over the past year, soaring by 755%. Brittain and Meadon now have £5.8 million booked with the travel agent, and another £2.7 million in TUI Travel. TUI’s stock has been comparatively earthbound since last October, although a 49% ascent is still impressive. Last week, TUI confirmed that it expected this year’s profits to be 11% ahead of 2012’s.
High-street bookies are another area where Brittain and Meadon have spread their bets, owning £2.8 million of William Hill and £1.9 million of Ladbrokes. The former’s share price is up by a quarter over the past year, but the latter has lost 3% after it doubled in value through 2012. Richard Glynn, chief executive of Ladbrokes, recognised last week that it has been a ‘challenging’ period but maintained that he was implementing the operational changes that wold revive the business by early 2014.