Invesco Perpetual’s Global Opportunities manager Stephen Anness has swooped on Rolls-Royce shares after the price plunged by more than 20 per cent last month.
Mr Anness, who took on the fund in December 2012, said the engine manufacturer was added after it suffered its “first profit warning in more than a decade” and was part of a raft of stock changes made in February.
“The share price fell more than 20 per cent, which we regarded as a significant over-reaction given the quality of the franchise and the attractive long-term growth prospects for the business,” he said.
“The company has an enviable portfolio of products across aerospace, defence, marine and energy sectors and a strong repeatable revenue stream from the servicing of its products.”
Shares of Rolls Royce were trading at roughly £12.10 on February 12, but reached a low of £9.61 by February 26, although since they have recovered partially. The manager’s portfolio activity included several sales. Mr Anness said he exited energy giant BG Group, services company Rentokil and sub-prime consumer lender World Acceptance.
“Although we were comfortable with the limited downside potential in BG, our concerns over the company’s ability to extract value from its assets, notably in Brazil, led us to sell our position,” he said.
“Rentokil was a special situation/turnaround story and has performed well, but we now believe there are better opportunities elsewhere. Similarly, the sub-prime consumer lender, World Acceptance, had also performed well and we were mindful of the possibility of increased regulation in this sector.”
The manager acknowledged that Chinese internet gaming business Netease was the “biggest detractor to performance”, but remained confident in the business.
“Fourth-quarter earnings were decent, however. There were some margin concerns with increased spending to promote new titles,” Mr Anness said.
“The shares can be volatile and we expect them to bounce back with the stable performance of legacy titles, the introduction of new games and the future monetisation of mobile games.”
Elsewhere, Mr Anness said one of the stocks that detracted from performance the most in January – US retailer JC Penny – recovered to become the best performer in February.
“The stock recovered strongly in February and was our best performer,” he said. “The company went some way to allay concerns after a recovery in gross margins and an improvement in online sales during Q4.
“While we appreciate that we are only in the stabilisation phase for the business, we are confident that the new management team is on the right path with increased cost control and delivering the product set that their customers want.”
Mr Anness took on the fund in December 2012 after relinquishing his UK Aggressive fund to colleague Martin Walker.
Since taking on Global Opportunities, he has delivered a top-decile return of 39.5 per cent compared with the 21.4 per cent average return from the IMA Global sector, according to FE Analytics. This means the fund is also in the top-quartile in three- and five-year periods.