Artemis’s Weldon ramps up value exposure
Artemis’s Cormac Weldon has joined the ranks of managers upping exposure to value stocks, but maintains it is “not obvious” these will rally soon.
Mr Weldon has reduced the weighting to growth stocks within his £316m Artemis US Select fund by 10 percentage points since last summer, with value now making up 30 per cent of the portfolio.
Recent years’ returns have been dominated by growth stocks, with investors showing little signs of returning to out-of-favour areas such as energy and commodities.
For example, the S&P 500 Growth index rose by 3.8 per cent in 2015, whereas the S&P 500 Value index fell by 5.6 per cent.
This continued dispersion has meant many managers had renewed hopes for value stocks this year, but Mr Weldon maintained that his changes had taken place on a “stock-by-stock basis”.
He said: “The question clients ask is, have growth stocks done too well and should we buy more cyclical or value?
“We have done a little bit of top-slicing of some of the growth names and have bought some more cyclicals, mainly in technology.
But he added: “Economic growth is still relatively low in the world – in the US it’s 2 per cent. It is not obvious that we should be buying loads of deep-value cyclical stocks.”
However, in recent months the manager has taken gains out of healthcare holdings, including Universal Health Services and Centene Corporation. Some of these decisions related to concerns that the healthcare sector would be hit by political pressures.
Mr Weldon moved from being 1 percentage point underweight the sector at the start of September, to 5 percentage points by early December.
But the market’s fears also led to a sell-off in veterinary drugs maker Zoetis, which the manager was able to exploit.
The firm – which is included in healthcare indices – was being unloaded as the sector’s stocks sold off generally.
Mr Weldon said: “It doesn’t make drugs for humans – it makes drugs for animals – but the exchange-traded funds were making redemptions.
“We think healthcare is likely to be a political issue leading up the US election. So now isn’t the time to raise prices when you might otherwise do it.”
He added: “Obamacare supercharged demand. People who didn’t have insurance and didn’t look after themselves and postponed treatment started getting things looked at. That’s positive for demand, but it appears that group of people has gone in and got treated.”
Meanwhile, Mr Weldon has ventured back into energy with a position in Occidental Petroleum Corporation.
He said: “In the summer we had zero in energy and a lot of the sector became much cheaper. We thought it was prudent to get back involved, but through a high-quality company with a good balance sheet.”
The manager continues to favour Amazon, with the online retailer his largest holding towards the end of 2015 at 5.5 per cent. But he has taken profits and reduced this position slightly.
He noted that other “big drivers” in the fund had been video software stocks, such as Activision, because of growing demand and the profitability of download sales.
The Artemis US Select fund has delivered 8.9 per cent in the past year, compared with the average return of 2.2 per cent by its Investment Association North America peer group, data from FE Analytics shows.
KEY FIGURES
10pp
Percentage point increase in the Artemis US Select vehicle’s value weighting from last summer
5pp
Fund’s underweight position to US healthcare sector
