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Liontrust managers tip pharma to shine and utilities to fall
Markets
by Rachael Revesz on Jan 31, 2013 at 15:18
Pharmaceuticals are due for a rerating upwards but utilities stocks are overpriced, say Liontrust’s fund managers, including Jan Luthman (pictured right) and Stephen Bailey (pictured left). The managers also give a thumbs up to gambling and asset managers.
Fund managers speaking at the Liontrust annual conference last week singled out the themes, sectors and stocks they believed worth investing in and those best avoided.
Pharmaceuticals
Julian Fosh and Anthony Cross, the AAA-rated managers of Liontrust’s £554 million Special Situations , £201 million UK Growth and £144 million UK Smaller Companies funds, said pharmaceuticals had been refocusing on emerging markets, lifestyle, over-the-counter and branded generic drugs: areas offering greater growth and pricing power, and less litigation risk.
Fosh (pictured below) picked GlaxoSmithKline as a company that had passed their quality test. ‘This stems from its intellectual property, sensible management of its capital base, leverage of its distribution channels and its move into consumer areas,’ he said.
Jan Luthman, manager with Stephen Bailey of the £47.4 million Liontrust Macro UK Growth fund, said pharmaceuticals deserved a rerating similar to tobacco’s (see graph).
‘The question is how much of that has already happened and has been discounted by the market?’ said Luthman. ‘The answer is absolutely nothing. This is a powerful story.’
Utilities
Luthman and Bailey argued that utility sector valuations were too highly priced in a low-growth environment. As interest rate expectations change, they said, the value of utilities could fall sharply.
In the fourth quarter of 2012, the last utility company the pair held, International Power, was taken over and they did not replace it in their funds.
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