Transfer time for your portfolio? Fund managers reveal their top buys and sells
The link between investing and the end of the football season may not seem an obvious one. But with clubs using the summer break to reassess the strength of their teams, investors could be wise to do the same with their portfolios and re-evaluate the holdings that merit a spot and those that deserve to be dropped.
Chopping and changing investments frequently isn’t something experts advocate if you’re a long-term investor as you could incur unnecessary trading costs and you won’t give your investments time to grow.
But there are a number of reasons – both good and bad – why it might be necessary to make changes.
From a positive point of view, the stock may have risen and hit your target price so you may want to take some profits. You may also want to lock in some gains after markets have risen and you’re unsure whether they have further to go.
On the downside, your holding may have underperformed and you might want to cut your losses, or you have a better option and want to use the money elsewhere. Perhaps there’s been a change such as new CEO of a company or a new manager of a fund.
Whatever the reason, it’s worth thinking carefully about any portfolio changes and not making any rash decisions.
For those who do want to switch things up, and who are looking for some investment ideas, Darius McDermott, managing director of research firm FundCalibre, asked five top fund managers for their best buys and sells over the past 12 months.
Thomas Moore, Standard Life Investments UK Equity Income Unconstrained
I bought cruise liner business Carnival on June 2016 at 3361p per share and added to the holding after Brexit. At a time of irrational market anxiety towards consumer stocks, we had conviction in Carnival’s demand outlook, particularly in the US, where disposable income was showing signs of improving. The share price on 10 May was 4812p.
I progressively exited the holding in online property portal Rightmove during the second half of 2016 at between 4052p and 4207p per share. The stock’s high valuation reflected the market’s confidence in its ability to use its dominant market position to increase prices over a prolonged period of time, in contrast to the market’s scepticism at the time of my initial purchase in 2014 when worries about a new competitor, OnTheMarket.com, had created a buying opportunity.
Sue Round, EdenTree Amity UK
Luceco, which manufactures and distributes electrical products. It has strong brands that are differentiated through vertical integration and rising gross margins. It is entering new product segments and geographies and has double digit earnings growth supported by a very strong balance sheet. It’s an excellent sustainability story through energy efficiency and low carbon. The share price is up 90% since we bought at IPO.
Hayward Tylee, which develops, manufactures and supplies high end industrial pumps and motors. We sold after a company meeting at the facilities in Luton, during which it became apparent that the company’s revenue line was going to be impacted by a delay in orders for one of their divisions. Shares have fallen off by a third since we sold off the position.
Anthony Cross, Liontrust UK Special Situations
YouGov is a market research business, providing important information to corporate clients and media agencies about their end customers and markets. The company operates a panel of more than four million members around the world, giving it ‘economic advantage’ primarily via a data-driven distribution network. It has gone on to make double-digit percentage share price gains.
NCC Group. Portfolio turnover on the fund is low. We tend to stick with companies for the long-term. However, on occasion we are forced to reassess whether a company has the type of intangible asset that we seek out. One company we sold last year is cyber security specialist NCC Group. The growth opportunity for the company had looked very promising but the pace of its acquisitive expansion proved to be its downfall as it began to suffer integration difficulties. This led us to question the returns it could generate from its intellectual property and software distribution network.
James Thomson, Rathbone Global Opportunities
Activision Blizzard. Some 155 million Americans play video games regularly and a wave of new revenue opportunities is driving a supercycle. This is the world’s largest video games company delivering a string of hits including Call of Duty, Overwatch, Guitar Hero and Candy Crush.
Travis Perkins. The UK’s largest builders’ merchant has been struggling with cut-throat competition and the ever-present fear of a weakening appetite for renovation, maintenance and improvement work.
James Clunie, Jupiter Absolute Return
Hays Plc. When we first invested in this UK-based recruitment firm, a year or so ago, it was around 130p per share, which seemed to discount a recession already so we felt it should be robust if a recession did actually occur. The share price then collapsed after the Brexit vote, which surprised us given that the firm earned much of its profits outside the UK. We were buyers all the way down to about 90p. Eventually, the shares recovered and now trade around 170p. It did of course help if you didn’t panic in the middle, but instead did the opposite and bought more.
Best sell (we shorted this stock)
Under Armour Inc, the US-based apparel and accessories firm. Under Armour is a stock for football aficionados (well, for fans of American football, at least). We found the stock over-priced under most scenarios. Perhaps shareholders were excited about global growth and expansion into other sports and sportswear niches. The stock also had many fragilities: aggressive accounting and rapid asset growth. The stock proceeded to disappoint on sales and earnings growth, relative to high expectations in the market. The share price has halved in the past year, even as the firm grew.