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The stocks catching analysts out

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

He says analysts are still underestimating the company’s scope for future growth. Elsewhere in the portfolio, AB Foods is another stock that catches analysts out, he says. The managers were tempted into the stock in June and July as they believe the growth associated with its retail arm, Primark, has been undervalued.

‘Everyone knows it is a good business and growth will come from it, but we think they are underestimating growth for Primark if it rolls out in Europe,’ Pattisson said.

The duo also recently bought Britvic, attracted by its new management team and its approach, which they expect will result in positive surprises for the stock.

‘We are completely bottom-up driven in terms of themes. We have quite a high exposure to high quality consumer cyclicals such as AB Foods, Next, Whitbread and the housebuilders. I think they will go through a consolidation phase for six to nine months and have been consolidating now for six months.

‘Just looking at Barratt Developments – it is looking cheap again. It will probably go nowhere for the rest of the year, but once the consolidation phase is worked off there could be another strong run,’ Pattisson added.

The fund manager is by no means enthused by BT’s recent foray into TV and broadband.

‘This is not of interest for us. If anything, it makes us queasy around the edges,’ he said.

However, he stresses that BT is a large company that has seen a turnaround in its prospects and can afford to move into new areas. And while broadband and TV are competitive areas, he expects the company to benefit from broader growth in the sector alongside its competitors.

‘My suspicion is it is indicative of an industry settling down over the next few years, so you could be caught out as this could be good for all of the players,’ he said.

It is not about who will be the winner at the expense of the loser. I expect there will be more winners as there is growth in the industry.’

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