US equity highs are ‘super bullish’, claims Wintle

Neptune’s Felix Wintle has claimed the US market is “super bullish” in spite of the S&P 500 index having pushed through record highs repeatedly in the past six months.

Global and US equity managers have been cautious on valuations in the country after a strong bull market run in equities that saw the S&P 500 index gain 31.6 per cent in 2013. This resulted in the market’s best calendar-year gain in more than 10 years, in spite of the US Federal Reserve unveiling its plans for the tapering of quantitative easing.

However, Mr Wintle, manager of the £447.1m Neptune US Opportunities fund, argued that the all-time highs were a “massively bullish” signal.

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“It is telling you that the financial crisis is over,” he said. “We do want to keep pushing this bullish argument.

“In 2000 [at a lower market level] the phone was ringing off the hook with people wanting to buy. Today the market is higher but is the phone ringing off the hook? People are not tearing their hair out trying to buy equities and that to me is super bullish.”

The manager cited an increase in US companies buying back shares from investors as providing a positive boost that had not been seen “for a long time”. He also pointed to the country’s low inflation level and oil prices as positive for the economy and the stockmarket, as “US equities tend to perform well in a low-inflation environment”.

The US Opportunities fund has a strong cyclical tilt with 15.2 per cent invested in financial stocks at the end of March, according to its latest factsheet, while a further 12.2 per cent was allocated to industrial companies.

Mr Wintle recently added to his financial holdings with an investment into Bank of America, which has seen its share price rise 32.4 per cent in the past 12 months. This was made at the expense of a position in biotech specialist Gilead, which was one of the worst affected stocks in this sector’s recent sell-off.

Mr Wintle also hinted that he could increase his 4.3 per cent weighting to the energy sector, as “we are moving to a mid-cycle period in which energy usually does very well”.

Three calendar years of underperformance relative to peers meant Mr Wintle’s fund ranked in the bottom quartile of the IMA North America sector in both three- and five-year periods to April 23, according to FE Analytics. Mr Wintle said this was down to getting “out of kilter” with swings in market sentiment in 2010 and 2011, during a period in which investors switched from ‘risk on’ to ‘risk off’ and back again.

However, in the past 12 months the fund has shot back to the top of the performance charts, posting a top-quartile 13.3 per cent gain. In 2013 the fund ranked 11th in the sector out of 105 peers with a return of 36.9 per cent, according to data from FE Analytics.

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