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Love to hate: top managers' favourite unloved dividend stocks

by Eleanor Lawrie on Apr 02, 2014 at 10:34

A-rated Simon Gergel, who runs the £87 million Allianz UK Equity Income fund , is also taking a second look at the banking sector, favouring HSBC.

‘It has become more difficult to find that many good-quality companies with a good yield,’ he said, adding that the fund is ‘looking for situations where value, growth or cashflow is mispriced’.

HSBC is trading on a cheaper valuation than Lloyds and with better structural growth,’ he said. Gergel is reassured by the fact that the company has a history of conservative management.

Unlike Buckingham, he is not tempted by other banks because of governmental pressure to meet capital requirements.

Like Buckingham, Gergel is also adding stocks from the troubled commodity sector, but within that he favours oil companies over miners, as he believes the mining companies are subject to too much uncertainty.

‘The oil majors BP and Shell look very solid to us as cashflows are improving and they are not spending so much money without getting a decent return,’ he said.

But Gergel is mindful that China’s shift away from infrastructure towards a consumption-led economy is not going away.

‘Mining is a bit harder to be confident on because you are more dependent on iron ore and copper, and it is much more dependent on China,’ he said.

‘We are nervous about where the iron ore price might settle in the long run, whereas oil is growing steadily in the Middle East and emerging markets. We are more relaxed about the outlook for these companies.’

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