White moves into small-cap property

Premier’s Chris White has made a play into small-cap property stocks in his equity income funds by supporting two new company listings.

The manager of the £181m Premier Monthly Income and £361m Premier Income funds participated in two initial public offerings in December, buying stakes in warehouse provider Tritax and windows and doors specialist Safestyle.

“It is important to go where you think the value is and avoid the crowded trades – focus on the real money opportunities,” Mr White said.

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The manager said both stocks traded at yields of 6 per cent, helping to support the Income and Monthly Income funds’ yields, which are 4.4 per cent according to the latest factsheets.

This figure is significantly higher than both the FTSE All-Share index’s yield and the average yield of funds in the IMA UK All Companies sector. As part of the manager’s increased bullishness on the property sector, Mr White also invested in Aim-listed Sirius Real Estate following a capital restructure.

He said this had reduced debt significantly and led the office and industrial property company to trade at a discount with an attractive dividend, while many other property businesses were trading at premiums.

The manager said he had balanced his small-cap exposure with positions in several mega-cap names, including Royal Dutch Shell, Imperial Tobacco and BAE Systems, where he saw “real value”. “These stocks yield 5 per cent and are growing their dividend, with decent balance sheets, so they look particularly attractive,” Mr White said. “They look undervalued relative to other areas of the market.”

The manager said strong rallies in mid caps had left valuations looking “stretched”, and predicted a rotation towards areas of value as the market trends higher.

He said: “Shell is currently priced for nothing. It had very poor Q3 results but finished that week fairly flat, while mid-cap companies posting poor results fell 5-6 per cent as they were priced for perfection.”

Mr White recently achieved a three-year track record running the Income and Monthly Income funds, having taken on the products in December 2010 after joining Premier from Threadneedle.

In the period since he took over the Monthly Income fund, it has gained 54.5 per cent, ranking it in the top quartile of the IMA UK Equity Income sector, according to FE Analytics.

The Income fund posted a second-quartile 52.8 per cent return, the data provider added.