A decision to sell highly priced stocks and build up cash helped Fidelity’s Dan Roberts to avoid the full force of the recent market rout.
The manager of the £100m Fidelity Global Dividend fund increased his cash holding earlier this year from roughly 4 per cent to nearly 8 per cent at the end of September.
Mr Roberts said he had started building up the cash because some of his holdings had reached valuations which he felt were unjustified and so divested them.
The manager said he sold his entire stake in Deutsche Post and asset manager Schroders, as well as reducing other holdings, including technology giant Microsoft.
He also reduced his exposure to more sensitive areas of the market, including industrials and financials, ahead of the downturn.
This has meant in the month to October 27, Mr Roberts has returned 0.2 per cent, as opposed to the losses experienced by peers and his benchmark index.
The IMA Global Equity Income sector has lost more than 1.6 per cent in this time frame, while the MSCI AC World index has lost 1.9 per cent, according to data from FE Analytics.
Since the market falls, Mr Roberts said some opportunities had been created; however, he was in no rush.
He said: “There isn’t a complete lack of ideas, but they are difficult to come by. I don’t feel forced to reinvest some of the cash.”
Markets took a severe tumble in October as fears about the impact of the US Federal Reserve removing its support for the economy and weak economic growth in Europe weighed on market sentiment.
“The sell-off in the past month has thrown up opportunities. There are stocks that I quite like, but I’m being relatively patient,” he said. “I don’t feel pressured to chase the market as it rebounds.”
One area Mr Roberts has found some stocks to buy, though, has been technology.
The manager said five or six years ago these stocks were considered “sexy”, and therefore expensive.
He also said they had not been a good option for an income portfolio, but as the businesses have matured they have started to grow their dividends.
One stock the manager bought recently is Oracle, which back in 2009 had a quarterly dividend payout of $0.05 per share, but now offers $0.12 per share.
Another recent purchase, Symantec, began offering a dividend payout in August 2013 at an attractive level of $0.15 per share.
In general, however, Mr Roberts thinks the market is overvalued.
He expects that in the medium term, which for him is five to seven years, equities will produce mid single-digit returns.
Mr Roberts joined Eden in July 2011 from Gartmore to join his former Gartmore colleague Leigh Himsworth.
However, by September of that year, he had announced his defection to Fidelity to be part of a dedicated equity income group of managers.