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Why SLI's Moore backs 'self-help' Close and phenomenal Barclays
by Sarah Miloudi on Sep 12, 2012 at 14:35
Thomas Moore, Standard Life Investments' A-rated income star, is backing Close Brothers' 'self-help' story, believing the financials stock can deliver despite the gloom hanging over the broader sector.
Moore (pictured) pointed out the banking industry is on track to be 2012's best performer in terms of growth, despite being hit by tougher regulation and bad press linked to fines and bailouts during the credit crisis.
Speaking to Wealth Manager, Moore said that Close will benefit from the spread of its business, which encompasses brokerage and market maker Winterfloods, banking and asset management.
'Bank growth is coming through, it's got Winterfloods and a wealth management division,' Moore said.
While the Standard Life Equity Income Trust manager fully expects these arms of Close to thrive in the months ahead, he argued the stock's 6% yield means it does not have to add a large amount to its value to deliver for investors.
Close Brothers, listed on the FTSE 250, is due to issue to the market its 12-month trading update on 25 September. It is expected to tell investors that in line with its last report in May, growth in its banking division has been strong while difficult trading conditions for Winterfloods - its brokerage, platform and market making arm - dragged on the company's overall performance.
Close Brothers' asset management and private client division are also thought to have made progress, with the former division nearing the end of its reconstruction process and its discretionary division managing to keep private client assets constant despite a trend for investors to reduce risk and opt for more passive options.
Barclays v Lloyds
Moore's conviction on some financials might sit out of sync with many of his equity income peers. However, unlike popular defensive stocks like pharmaceuticals, certain names in the banking sector should deliver despite the headwinds facing the wider industry.
Moreover, stocks like Astrazeneca are looking expensive and have capitulated to the wider trend of mega and large cap defensives facing earnings downgrades, despite investors continuing to pile in.
Moore sold down Astrazeneca as part of a broader restructure of his £130 million portfolio towards small and mid cap names, but believes that in contrast to cyclicals these stocks no longer justify their higher price tags.
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