Fund managers risk running into issues due to being hyper focussed on owning “quality growth” businesses, according to Latitude Investment Management CIO Freddie Lait.
In Portfolio Adviser’s latest video interview, Lait argues the “quality” moniker has “been fully absorbed by the growth side of the market” leaving cyclical stocks trading on anaemic PE ratios.
JP Morgan, which he owns in the Latitude Horizon fund, is trading on 6x earnings despite the fact it continues to generate cash, is paying a 4% dividend and is growing at a tangible book value per share of 9% per year from 2007 until today, including during the global financial crash and Covid crisis. “It’s something you read about and you don’t really believe exists today”.
Elsewhere Lait discusses why he sold out of Electronic Arts and has been cutting back his tech positions in Google, Sony and Visa and initiated stakes in Diageo and Heineken which are being treated like cyclical businesses thanks to Covid.
He also chats about why the mega absolute return funds have failed to provide downside protection during the Covid sell-off and why he is not a fan of shorting or leveraging in his fund.
For more, watch the video above.
