Rathbones’ Thomson cuts oil stocks but retains faith in US
In spite of reining in his US allocation, Rathbones’ global equity portfolio manager James Thomson has by no means lost his faith in the world’s largest economy.
The £545m Global Opportunities fund started 2015 with just shy of 70 per cent invested in the US. Today that figure is 59 per cent, but Mr Thomson said he still had “a lot of chips on the US”.
On the back of the volatility in the natural resources sector, the manager has sold off a lot of his shale oil and gas plays this year, which has led to the slashing of his US overweight.
However, his overall outlook towards the US market, which has already enjoyed a 23 per cent run in the past 12 months, remains decidedly upbeat.
He said: “My allocations tend to be as a result of stockpicking calls and that brought the weighting back. But we are not pulling our punches, we still believe in the US investment opportunity.”
Mr Thomson said the 3 per cent earnings growth for US companies pencilled in for this year will be “a pretty easy hurdle for it to jump over”, so stocks could outperform low expectations.
The looming threat of tighter monetary policy is not overtly concerning him either and, in line with the market consensus, he expects the US Federal Reserve to finally push the button on higher interest rates some time around September – though any tightening will be “slowly executed”.
Against the tide, and to take advantage of the general election tension, he used the extra cash on his hands from selling US holdings to raise his UK stocks quota from 20 to 25 per cent, judging that the stress was overdone from a long-term perspective.
Mr Thomson admitted he avoided “the most politically sensitive areas such as utilities and banks” but elsewhere, he topped up on online real estate portal Rightmove, which he views as more an advertising, as opposed to property, play.
From the start of the year to May 25, the strategy has worked in his favour, with the fund ahead by 9 per cent versus the IA Global mean return of 7 per cent.
The outperformance comes even though Mr Thomson has been focusing on two markets, the US and the UK, that are particularly out of favour with global investors.
The latest Bank of America Merrill Lynch fund manager survey for May found the US and the UK were the regions in which the most global investors had an underweight position, with investors’ bearish bets on the US hitting their highest level since January 2008.
While the “rampant speculation” currently characterising China’s equity market remains a major concern for Mr Thomson, overall he is bullish towards global equities.
He added: “I am still positive, but the collapse in oil prices has unmasked problems in many petrodollar reliant nations.
“But we do expect it is going to be a bumpier ride this year.”
