Callow said he is looking to take advantage of the UK market “breaking out to the upside” having been range-bound for the past three years.
“While technical in nature, we believe there are fundamental reasons as to why these breakouts are occurring. Namely, tail risk has been reduced as a result of central bank and political intervention, while at the same time financial repression is slowly forcing investors into riskier assets.”
In addition to UK equities, Callow favours European, Far East and emerging market stocks and has used the sale of United Utilities at the end of last year “at a healthy profit” to start some new positions.
Callow’s recent buys:
- Talk Talk, the telecommunications company, is rapidly gaining market share, having introduced a new television service that enables bundled packages (TV, internet and phone line) to be offered to its customers for the first time.
- Marks & Spencer is reinvigorating its estate and product range, having appointed Belinda Earl as its new Style Director. At the same time, improvements are being made to its supply chain.
- Prudential, the life insurer, continues to benefit from favourable demographics and a rapidly growing Asian savings pool, whilst its US business is performing strongly.
- ITV is extremely cash generative and has a robust balance sheet that will enable it to rapidly grow its dividend. The company is being transformed by a highly experienced management team that wish to reduce the company’s cyclicality.
- Premier Foods is also a company being transformed by new management who possess valuable industry experience. Although at a much earlier stage in its transition and having a weaker balance sheet, this is reflected in the current valuation and we see material upside potential in the share price.
Others are less optimistic about the stock market rally we have seen in the past couple of months, find out why here…
