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Why David Coombs is selling Woodford
by Danielle Levy on Nov 27, 2012 at 14:45
The investment manager has introduced two key trades over the past month, which include a switch out of managers favouring defensives into growth strategies.
This includes selling down Woodford’s trust through his Rathbone Multi Asset Total Return fund , having built up the position since through 2009 and 2010, in favour of the Pimco Global Equity Dividend fund. ‘We have been selling Edinburgh Investment trust on a 5%-7% premium, having bought the net asset value on a discount,’ he said.
Coombs, who is Rathbones’ head of research, said the decision had been driven by the view that the pricing of defensive stocks is starting to look overvalued, causing the manager to broaden equity exposure.
‘Within our equity content we are trying to take profits on sectors we feel are starting to look overvalued. The bubble in defensives could continue for 12 months. We are not out completely, but starting to rotate,’ he explained.
Coombs has also reduced exposure to Morgan Stanley Global Brands into the Kiltearn Global Equity fund, which has more of a bias towards cyclicals.
Underpinning the rotation is a shift out of high yield and investment grade bonds into equities, on the back of a more bullish outlook for global growth – although this trade has been hedged by a move into long-dated gilts and index-linkers.
‘We do feel the outlook for growth will be driven by the US and China as we are more positive on both. We think the regime changes will be positive. China has been through a difficult transition and we think there will be more stimulus in the first quarter of next year, perhaps a stimulus package in March.
‘In relation to US growth we are on the optimistic side of the fiscal cliff debate. We think it will come out the right way, but we are looking at gilts as well to hedge that,’ he said.
Coombs bought into long-dated gilts for the first time since June, having previously bought and held gilts between March and June of this year. ‘We are already in profit on that position. My strategy across two of the funds has been increasing equities and long duration bonds as a hedge to manage volatility,’ he explained.
Over the three years to the end of October, he has posted a 14.64% return with the Total Return fund versus a 6.2% return on Libor.
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by Michelle McGagh on Dec 11, 2013 at 05:01