Ewing upbeat over prospects for US recovery

He said he had been broadening the sector base while cutting the number of holdings, returning the strategy to more of a 'best ideas' approach.

The manager said that given the volatility of the past two years, he took a prudent approach to his positions, with roughly 75 holdings in the fund.

This has now been trimmed to a tighter portfolio of 55-65 stocks, which he will maintain for the foreseeable future.

Mr Ewing said a focus on regional banks, namely New York Community Bank Corp, helped the fund outperform in the fourth quarter of 2009.

He said the fund would keep hold of this bank, praising its excellent management and strong balance sheet, after seeing it gain almost 40 per cent from September to December 2009.

He said: "This is a theme of ours - the strong are likely to get stronger and take advantage of their strong balance sheets and ability to pick up the crumbs in the industry."

Mr Ewing said the Federal Deposit Insurance Corporation - the organisation responsible for monitoring failing banks – was seeing a number of small banks going bust in the US.

"It is looking for other stronger companies to rescue these institutions," he said.

"New York Community Bank Corp has just made one of these acquisitions out of bankruptcy, and it's very well placed to buy assets cheaply and build further on its core capability, which, of course, is incremental to earnings.

"So it's a great story for us, and it's done extremely well."

In the pharmaceuticals space, the manager said Pfizer and Merck had been core holdings for the last six months.

He said both stocks had performed well in a less-than-ideal market, calling it an early beta cycle market.

"This is not typically the best one for pharmas, but of course they're institutions that were washed out for 5-6 years, where the market frankly had given up on them, and we like that characteristic," he said.

The manager said this approach of picking out value when others "abandon ship" had helped the fund's performance.

Mr Ewing said he foresaw a recovery taking place in the US economy, pointing out the US grew at 5 per cent in the fourth quarter, while the UK grew 0.1 per cent. He said the growth would continue to surprise on the upside during 2010.

"While the consumer balance sheet concerns are well known, there is more fiscal stimulus to come. The export sector is extremely competitive in the US and is doing extremely well, the industrial sector is recovering very strongly and, crucially, the dollar is still generally low against most currencies in the world, and that helps future competitiveness - it helps productivity."

However, he said at corporate level, he expected capital expenditure to continue to increase, seeing early signs of spending on advertising, capital equipment, travel, entertainment, leisure, group events, conferences and so on.