Barton buys into two global firms

Oriel Asset Management’s Patrick Barton has bought into two globally-focused companies as his fears about the persistent strength of sterling subside.

The manager has attributed a large part of his Oriel UK fund’s underpeformance this year on its exposure to firms that generate revenues from overseas.

Mr Barton said roughly 80 to 85 per cent of the revenues generated by companies in his portfolio came from outside the UK.

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Therefore, the fund was likely to struggle if sterling was strong versus most global currencies, which it has been throughout the first half of this year.

But these currency concerns did not deter Mr Barton from recently buying into two more multinational firms – clothing retailer Burberry and product-testing firm Intertek – because he was now less concerned about sterling’s strength. The impact of the rally in the UK currency had also presented an attractive entry point for both stocks.

“It would be wrong to think that because we are concerned about sterling’s strength it would mean that we would shy away from investments that we thought were the right ones to make,” said Mr Barton.

Burberry’s share price has “gone sideways” for more than a year, according to Mr Barton, and he said one of the reasons for that was “the fact that sterling has strengthened and that has put pressure on reported numbers”.

However, the manager said this relative weakness in the retailer’s share price meant there was “an opportunity opening up in a quality business we have been tracking for quite a few years”.

Mr Barton said he had bought into both Burberry and Intertek before the market sell-off in October and then added to the positions during the autumn.

The two new stocks have brought the number of holdings in the Oriel fund up to 27, with both positions making up approximately 4.5 per cent of the fund.

He said the purchase of Burberry filled a gaping need for exposure to “the aspirational luxury market”, of which Burberry was a major global player, and that his portfolio was also “underexposed” to China, although he professed to not have a view on the macro economic state of the country.

Mr Barton said in spite of these two recent purchases, this did not mean he was “overtly trying to make a call on sterling”, although the behaviour of the currency does seem to be a major driver of the stockmarket movements of companies making up the fund.

But the manager said his view on the likely volatility in the UK economy suggests sterling will “probably” weaken in due course.

If the UK currency does indeed weaken, it will likely provide a significant boost to the Oriel UK fund as next year’s company results show the comparative benefit.

Mr Barton acknowledged the fund had gone through a difficult time recently, slipping into the third quartile of the sector in the past year, however he said the past eight to 10 weeks had seen a turnaround, coinciding with the weakening of sterling. For the past three months, the fund has been top quartile.