Ford dumps holdings with foreign exposure
US equities manager Nick Ford has jettisoned several businesses that rely on overseas economies, while increasing his investment in domestic stocks.
The manager of Miton’s £99m US Opportunities fund sold four holdings in January and replaced the stocks with five businesses he thought would be driven by the strengthening US economy.
Mr Ford offloaded agricultural business Monsanto, technology company Aruba Networks and semiconductor manufacturer Texas Instruments.
He said both Monsanto and Aruba Networks had “substantial overseas exposure” and feared investors could react negatively “to the impact of unfavourable currency translation when earnings were reported”.
He added that Texas Instruments also generated lots of its business abroad, meaning analyst earnings forecasts were likely to be cut as the dollar strengthened against other major currencies.
Mr Ford also sold State Street in favour of rival US bank Wells Fargo, which – while having an international presence – was now being driven by its “large residential mortgage portfolio” and “improving real estate and credit conditions” in the US.
The manager also bought television company CBS, which he said was a “good example of our current thinking”.
“CBS gets a substantial amount of its profits from advertising, yet only has modest overseas exposure,” he said.
“US companies should start to increase advertising expenditures if they sense that consumers have more money to spend.”
Many firms are predicting a pick-up in consumer spending in the US thanks to the falling price of oil reducing the amount the average American now pays to fill up their car.
Mr Ford said he expected American businesses to be “more inclined to spend on television advertising as confidence in the sustainability of the US recovery improves”.
Elsewhere, he bought medical device manufacturer Medtronic and two small-cap companies – healthcare billing firm HMS Holdings and fleet fuel charge card business Wex.
He said HMS had the tailwind of more people in the US accessing healthcare thanks to president Barack Obama’s wide-ranging healthcare reforms, and that Wex was the largest player in its industry and had high barriers to entry.
Meanwhile, Mr Ford said the impact of the falling price of oil could have negative consequences besides the positive boost to people’s spending power.
He said lower oil and gas revenues would “weigh on energy company profits”, a concern given that energy businesses had been an “important source of new hiring in recent years”.
“And reduced exploration and production activity in the nation’s new shale reserves may threaten a slowdown in jobs growth,” he said.
He added that falling profits for energy firms had “already reduced expectations for overall earnings growth for the S&P 500”.
