Franklin Templeton’s top-performing mid-cap star, Paul Spencer, has said he is taking a “second bite” of the housebuilding cherry after putting cash behind the sector again.
Mr Spencer, who runs the £971.5m UK Mid Cap fund, had earlier this year sold positions in Persimmon Homes and Berkeley Homes in a bid to cash in on what he saw as major gains from that part of the market.
The sector, measured by the FTSE Household Goods and Home Construction sector, has delivered 114.6 per cent compared with the wider FTSE All-Share index’s 57.6 per cent, according to data from FE Analytics.
He also divested his holding in Barratt Developments after the company was promoted into the FTSE 100 earlier this year.
But the manager said he has now moved marginally overweight in the sector again after putting more money into Bellway and Bovis Homes – taking what he called a “second bite” out of the sector.
He has a 3.7 per cent weighting in Bellway and nearly 3.2 per cent in Bovis – making both stocks constituents of his top 10 holdings.
Back in 2007, the UK government set a target to add an additional 240,000 homes a year by 2016.
The current level is 133,650 homes per year, according to the Department of Communities and Local Government’s latest report.
Therefore, Mr Spencer believes there is scope for the housebuilding sector to continue to perform, especially if the government – or a new leadership come May next year – wants to uphold the promise of building more homes.
He said roughly 45 per cent of his portfolio is invested in companies, such as housebuilders, which derive the majority of their profits domestically.
However, he said he had been shifting slightly to those that rely on overseas profits, pushing this up to 55 per cent.
“About 12 months ago it was nearer a 50/50 split, but we have sold off some of the UK content,” he said.
The manager said, though, that the split between domestic earners and overseas earners had been starker in the past, with a 60/40 split previously in either direction.
He explained that the slight bias towards companies with large overseas earnings was being dominated by businesses that gain their profits from Europe.
“The fund is slightly overweight Europe, but this is not because I have particularly strong growth expectations for the region,” he said.
“It is more because there is a subdued demand for European companies and that is making them a bit more depressed.”
Mr Spencer said he was also keen on certain sectors of the US market. He is keen on electronics and engineering companies as he thinks industrial production in the country has improved.
The fund has produced top-quartile returns in 10-, five- and three-year periods, according to data from FE Analytics.
It has lost money this year, but its 2.6 per cent loss in the past six months put it top quartile of the IMA UK All Companies sector.
