On the defensive
Compared with the domestic market, the distinction between growth and value styles, and the dogmatic managers that practice each approach, is often more clearly defined in US and European equities.
Still, with the IA UK Equity Income sector home to many of the biggest names in domestic investing, it is worth taking a look at some of the styles employed there. This ranges from Neil Woodford’s persistence with defensive stocks – Imperial Tobacco, GSK and BAT remain key holdings – through to JO Hambro’s Clive Beagles and James Lowen’s more contrarian bent.
Performance of Woodford Equity Income and JOHCM UK Equity Income could not have been more different over the past 12 months with the latter having suffered from its underweighting to defensives and an overweight position in oil and mining.
“We have built our oil and mining overweight as valuations in this part of the market have fallen to multi-decade lows on numerous measures,” Beagles and Lowen said.
“Along with the valuation angle, our attraction here is based on the market overlooking management actions on capital and operating expenditure.”
They added: “The fund is full of very cheap, well-placed companies. This is particularly true in small caps where we remain at our highest weight since launch in late 2004; our mid-cap exposure, in contrast, is currently modest.”
Still, many wealth managers are happy to hold both funds, so long as the managers stick to their convictions. It is often fund managers’ intrepidness that makes the asset management sector such a fascinating one to follow.