UK equity manager Nigel Thomas has invested in discount stores B&M and Poundland in spite of deeming them to be overvalued.
Mr Thomas, who manages the £4.6bn AXA Framlington UK Select Opportunities fund, told clients on a company webcast he had bought some of the B&M intial public offering in June.
At 270p Mr Thomas thought the stock was quite ”highly priced”, but given the growth of the UK discount store market and his three to five year view, he paid the price.
“The food retail market has been hit,” he said. “Tesco, Sainsbury’s and Morrisons need to change their pricing architecture so I’m not keen on them. At the same time, discount stores are expanding.
“These stores offer some food products, but they also offer a wide range of other goods. They have good growth prospects.”
Mr Thomas has also purchased Poundland stocks at quite a high price. However, he revealed that he has bought more of B&M than Poundland.
The big storm ahead for the UK equity market, according to Mr Thomas, will be the general election in 2015. This could change the corporate tax architecture through which he invests, he said.
The fund has returned 11 per cent in a year, compared to the FTSE All-Share, which has returned 10.33 per cent.
