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What is driving Threadneedle UK Absolute Alpha's short book?
by Danielle Levy on Oct 23, 2013 at 10:34
The manager, who runs the fund alongside Citywire A-rated Mark Westwood, has benefited from the rise of domestically focused shares, but now views some of these stocks as overvalued. As a result, he has taken profits on a number of these holdings and has also put on several short positions in the sector.
‘Our view is that some of the domestic shares have rerated too much. As well as selling there are a few shorts that we have been putting on in area where we feel valuations are pricing in a stronger recovery than we think is likely,’ he said.
UK recovery uncertain
Kinder questions the strength of the UK recovery, arguing that more consumer deleveraging needs to take place.
‘Over the last quarter or so, growth has been funded by more debt. We would like to see a recovery that is not built on further indebtedness. We would like to see more of a recovery in small and medium-sized enterprises and the manufacturing sector,’ he added
Although he is unable to disclose stock names within the fund’s short book, he said the portfolio was short a ‘domestic vendor of sausage rolls and pasties’ and had also benefited from short positions on outsourcing stocks over the past year – alongside a number of global quality names.
Kinder has profited from this positioning, but now some of the global defensive names have derated, he is spotting value in companies offering emerging markets exposure, alongside those that offer the prospect of defensive growth.
‘We are more interested in de-rated emerging market quality sectors and less inclined to chase the domestic recovery,’ he explained.
He is particularly positive on Lemsip maker Reckitt Benckiser and Unilever, highlighting the attractive yields on offer. ‘Equally, we have not sold out of our domestic exposure. We always run quite diversified portfolio and still own stocks like GKN, which we have had in the fund since we started,’ he said.
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- Reckitt Benckiser Group PLC (RB.L)
- Unilever PLC (ULVR.L)
- Wolseley PLC (WOS.L)
- Barclays PLC (BARC.L)
- GKN PLC (GKN.L)
- Rio Tinto PLC (RIO.L)
- Glencore Xstrata PLC (GLEN.L)