Marlborough’s Hallett dumps global growth stocks
Marlborough’s Richard Hallett has ditched stocks he believes are reliant on global growth, citing fears of a “feeble” recovery in developed economies such as the UK.
The manager of the firm’s £93m UK Multi-Cap Growth fund has been revamping the portfolio in the past year by selling out of companies he thought were not only fully priced, but also vulnerable to a slowing global economy.
Mr Hallett has also reduced his FTSE 100 index exposure and shifted towards firms focused on e-commerce.
The manager has dropped holdings such as insurer Prudential, engineering firm Rolls-Royce, oil and gas services business James Fisher and Sons, and distribution and outsourcing company Bunzl.
More broadly he is avoiding unloved sectors such as commodities, energy and globally cyclical industrials.
He said: “The world economy is showing signs of slowing and many of the quality firms operating in the global market are on very high ratings, so in the past year we have been gradually realigning the portfolio.
“We [aim to] buy good-quality companies where they are in charge of and can control their growth to an extent, independently of the economic cycle.”
A major part of the rotation – which has seen the fund’s weighting to the large-cap FTSE 100 index fall from 50 per cent two years ago to about 40 per cent – has been a focus on consumer-facing names capitalising on a rise in e-commerce.
These include payments-processing firms Worldpay and Paysafe, which the manager thought could profit from the “power of the internet”.
Mr Hallett said: “Worldpay is a play on growth in e-commerce. It has a significant barrier to entry because it is dominant in the UK.
“It has got more data and transactional history than anybody else, so it can offer customers preferential service.
“Paysafe [operates] in different sectors and is pan-European. It focuses on areas such as gambling and gaming, as well as niche sectors like travel, recruitment and online dating.”
Mr Hallett also favours businesses that have been making significant changes to either improve themselves or benefit investors – from mergers to cost-cutting and share buybacks.
One example is annuity specialist Partnership – a recent addition to the portfolio – which saw its share price slump following the announcement of this year’s pension reforms.
The manager said: “Partnership has been under the cosh because of regulatory changes in [pensions], but it and Just Retirement are the leaders in that space and have come together in a merger.
“That’s bulking up to a business which should make a better go of it in the next few years because of synergies, cost savings and better market positioning by removing a rival.”
Mr Hallett’s fund has delivered 50.6 per cent in the past three years, compared with the average return of 36 per cent by the Investment Association UK All Companies sector, data from FE Analytics shows.
