As volatility has returned, so has the value that the cream of the UK’s genuine alpha-seeking stockpickers have delivered versus their passive rivals – or so it may seem.
This is a trend most prominent since global equities were spooked by worries over China in late summer.
A good example is Invesco Perpetual’s Mark Barnett, who has had no exposure to mining companies, while also avoiding mainstream banks, in spite of being overweight the financials sector as a whole.
According to FE Analytics data, his composite performance year to date is up 8.1%, versus 4.4% from the IA UK Equity Income sector and 2.9% from IA UK All Companies averages. Since the end of August, he’s actually managed to deliver 3% growth, while most funds have struggled to break even.
“Notwithstanding the fact that the overall index has gone broadly sideways so far this year, the number of share prices, even within the FTSE 100 index, which are either up 30% or down 30% year to date is noteworthy,” he says.
“These moves in share prices over the short term have arguably created long-term investment opportunities for stockpickers, such as ourselves.”
Barnett also attributes portfolio outperformance to his holdings in tobacco companies, having delivered in share price terms as well as solid profits and dividend growth.
“I am positive on the outlook for these companies through 2016 and beyond as they have committed management teams and scope to continue to cut costs, improve efficiency, and enhance profit margins,” he adds.
“The tobacco holdings comprise Reynolds American, Imperial Tobacco and British American Tobacco. All three companies are strongly positioned in the US market where the cost of smoking relative to average earnings is amongst the lowest in the world and where the significant fall in fuel prices over the last year has further improved affordability, making the profit outlook appear attractive, in spite of a slowing global market for cigarette sales by volume. “
