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Majedie unleashes top performing UK equity income fund
by Dylan Lobo on Jan 28, 2013 at 07:40
'We want under-managed businesses with strong financials, companies gaining market share that are looking to be future leaders and undervalued pariahs becoming investible.'
In essence if a company has good dividend cover and growth prospects which is not reflected in the yield, Reid is happy to invest as long as the company is 'transforming'.
He uses EasyJet, which represents 4.7% of the fund, as an example of such a stock. 'The stock gave a 10% yield last year, with a special dividend accounting for 8% of this. The stock is now yielding 3% and is 3 times covered by earnings,' Reid explains.
'This is a good example of a company that has transformed and its income has come through. The clues were there 15 months ago. The company was under-managed and underpriced and for the dedicated analyst the opportunity was there.’
The fund holds 47 stocks at launch and its flexible style allows it to invest across the market spectrum.
Its biggest holding is traditional income staple National Grid, which accounts for 6.5% of the fund.
However, Reid stresses he does not invest in a company simply for it defensive characteristics. 'Even our defensive holdings are going through transformation. National Grid for example, is on a 6% yield and gaining more clarity on regulation.'
Aviva, which is undergoing a major restructure after shareholder discontent, is another fixture in his top 10 holdings representing 4.4% of the fund. 'The stock market concluded it [Aviva] was following the wrong strategy and we saw an opportunity,' Reid said.
He also uses his 20% overseas allowance to smoke out opportunities across the globe. Swiss drugs firm Roche, which accounts for 3.4% of the fund, is an example here. 'It [Roche] has the potential to be an industry leader and because of its strong research capabilities its going to do well.’
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