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View the article online at http://citywire.co.uk/wealth-manager/article/a721384

The stocks catching analysts out

by Danielle Levy on Dec 16, 2013 at 10:22

Citywire AA-rated Ardevora UK Income manager William Pattisson has been buying BG Group and Tullow Oil, arguing both stocks have been overly punished by the market due to negative sentiment towards oil.

‘BG Group looked quite cheap to us and we think oil is one of the areas that people are starting to get overly pessimistic about,’ Pattisson told Wealth Manager.

Pattisson said he and co-manager Jeremy Lang, also AA-rated, had been tempted into Tullow Oil as they believe the business has ‘randomly had a lean time of it’. Although he acknowledges it may take some time for the share price to recover (it is down nore than 30% since the start of the year at 839p), he says sentiment on the stock has turned too negative.

Aside from these positions and top 10 holding Royal Dutch Shell, Pattisson is broadly negative on commodities alongside pharmaceuticals, viewing the latter as a value trap.

‘There are long-term structural pressures on these companies. Some ostensibly look cheap – but there is a reason they look cheap,’ he added.

Growth orientated

The portfolio currently has more of a growth-orientated tilt than some might expect. While it looks and breathes like its competitors, he says it operates in a different way.

ITV is a good example of this growth tilt, with Pattisson noting that having staged something of a turnaround over the past few years, it has made the transition from value to growth.

‘It is now going to benefit from the economy improving and there is still a lot of capital discipline in the way they manage the business,’ he explained.

Next is another business where it is easy to say it has run its course, but it has moved over the last three years from a value to a growth stock. It is an incredibly well-run business,’ he added.

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