In his bi-annual report, the Citywire AAA-rated manager of the Axa Framlington UK Select Opportunities fund said the slower growth in Europe and China especially was reflected in September, when many companies were expecting to see an uptick in orders after the summer holidays.
However, in various sectors, many companies said the ‘telephone has not rung', which has led to some profit warnings and downgrades for this year and the next.
‘We are monitoring all our companies carefully,’ said Thomas. ‘However, this is not a precise art. As Eeyore put it, “Good morning. If it is a good morning, which I doubt.”’
Yet Thomas said all the backward looking economists, who have been predicting doom and gloom, tend to aggregate data which means they lose a degree of intelligence and analysis, as well as ‘important secular trends where businesses, because they are dynamic, adapt.’
Such trends include ubiquitous computing, oil and gas shale exploitation, LNG (Liquefied Natural Gas) replacing base load nuclear in some advanced economies, urbanisation and the ‘renaissance’ of US manufacturing.
The manager explained the supply shock of cheap US shale gas has certainly aided the US recovery.
‘While in Texas, we heard new orders for homes are rebounding strongly and housing starts are showing substantial growth over twelve months,' said Thomas. 'However, this is leading to shortages of framers, concrete workers, plumbers, roofers and painters, many of whom left the industry in the slump.’
Thomas is seeking to benefit from a recovery in construction and the economy by investing in Wolseley, which has around 50% of its profits derived from the distribution of building materials in North America.
He also invests in Ashtead, which is the second largest plant hire company in the US, where a secular change to rental is evident.
‘Labour costs, demand, talent, technology, availability and depth of capital markets, currency, transportation and energy costs, make the largest economy in the world an attractive place to do business,’ he added.
Over three years to the end of August, Thomas has returned 47.3% versus the FTSE 100 Total Return's 24.39%.