The manager of the Investec UK Equity Income fund has made no secret of the fact he likes BAT and it is now the biggest holding in the fund at 7%, up from about 5% previously.
Hutchins explained: “Within the quality portion of the fund we have been adding to tobacco names which have sold-off of late for various reasons. In particular, we have been adding to British American Tobacco.”
He also counts Imperial Tobacco Group among his top 10 holdings at 4.1% of the portfolio.
BAT, a favourite of Neil Woodford until he sold out of it in the summer, took a hit in August after the Serious Fraud Office announced it was undertaking a formal investigation into suspected corruption at the firm.
Elsewhere, Hutchins has increased the fund’s holding in “undervalued and underappreciated” media company Daily Mail and General Trust, from 1% to 2.4% of the portfolio.
He said: “The market seems to forget this is no longer a newspaper company. Only 25% of profits come from the paper but they have some very good growth businesses including Mail Online, also 75% of the business is from high quality subscription data business that serve other businesses.
“I think there are some very interesting changes going on at DMGT in terms of capital allocation and that is a stock that is being underappreciated. It is trading on a 3.5% dividend yield and 7% free cashflow yield.
“So we think there is positive change, a good quality business and valuations are on our side.”
The Investec UK Equity Income Fund celebrates its third birthday at the end of January. According to FE data, over the past year the fund has returned 13.5% against the IA UK Equity Income sector’s 12.4%.
