As far as the former Newton IM manager is concerned, this year the name of the game is liquidity.
Recently he has whittled down the number of holdings in his £580m Asian Income fund to 33, the lowest number of stocks the portfolio has held since launching in 2015.
Whilst trimming away the excess holdings, he has simultaneously upped his exposure to his top 10 positions, spanning names like Sands China, Samsung Electronics and Tencent.
With numerous signals pointing to higher inflation, Pidcock isn’t taking any chances and is trying to make his portfolio as “defensive as possible without raising the cash levels,” which still sit below 3%.
Most of the chosen 33 companies are large-cap, liquid stocks. And roughly 38% of them have a net cash position.
“What I’ve tried to do is make the portfolio as robust as possible from a liquidity point of view and a balance sheet point of view just in case we do see a snapback in markets and either a dip in liquidity or a mini-credit crunch,” he explained.
“We are seeing bond yields go up but if we also see the interest charged by banks go up, these companies won’t be negatively affected by that,” he continued. “In fact, if they’ve got money sitting on deposit, they may even benefit from it.”
Pidcock’s fund has suffered from a bout of underperformance over the last 12-months, which he says is down to its “relatively low beta.” It has returned 10.2% over one year versus the Investment Association Asia Pacific Ex Japan sector’s 21.6%.
But the last few weeks have brought good news for his top two holdings – Sands China and Taiwan Semiconductor (TSMC). At the end of December, both companies made up 5.92% of the portfolio. In the intervening weeks Pidcock has added more to his positions, taking them up to 6.5% each.
TSMC’s shares finished out this week strong, up 6.5% to TWD 255.50, thanks to what Pidcock calls “cracking numbers and positive forward guidance” which is “a continuation of a general move higher”.
Sands China, meanwhile, reported healthy price forecasts recently and confirmed its next dividend. More importantly, Pidcock likes the Macau casino operator, a local subsidiary of the Las Vegas Sands resort, because it plays into the “travel and experience” structural growth story taking hold in the Asia Pacific region.
“I do think that Asian consumers are increasingly keen to buy experiences rather than spending all their money on products and that’s following the pattern we’ve seen with consumers in the west.”
