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Threadneedle UK Equity Income
by Matthew Goodburn on Sep 05, 2013 at 09:40
The Citywire AAA-rated manager warned that investors cannot afford to pick stocks that are too cyclical and must guard their portfolios against further swings in market sentiment. This is especially at a time when the negative effects of QE are being played out across emerging markets.
Paying too much for EM growth
He told Citywire: 'Recent events are a reminder that a lot of indebtedness has not been addressed and coming out of the credit crunch everyone wanted to pay up for growth and we thought that was wrong. That has now been exposed by what is happening in emerging markets.'
The £2.5 billion portfolio continues to avoid banks and miners as a consequence and has done well from a range of relatively cyclical stocks in recent months.Colwell had picked such stocks up when they were relatively unloved, but he says he will 'not chase them at all cost.'
Strong performance has come from manufacturer IMI, building materials specialist WS Atkins and UK media group ITV.
But, since the bond-led equity correction of May and June, he has been turning to some high yielding stocks that have endured a period of underperformance, such as Imperial tobacco, AstraZeneca and media stock Reed Elsevier.
Colwell has also added to selective utilities, such as National Grid and brought into insurance giant RSA.
'RSA's dividend cut was already in the price and we think the new management are doing a great job of clearing its debt and getting on the front foot.'
'Stocks such as Imperial Tobacco and AstraZeneca are trading at a 10 year high yield high relative to the market. They are well loved stocks which have had a period of underperformance because the market gets overly focused on a few negative aspects.
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