Troy Trojan Global Equity fund manager Gabrielle Boyle has rejigged her top-10 positions after stepping in to buy fallen giants in recent months.
Ms Boyle said her £116m fund had initiated a new position in Procter & Gamble and increased holdings in both Alphabet and Swiss pharmaceutical Novartis in a bid to boost returns.
The moves meant Novartis shot its way up the fund’s rankings to become the largest holding by the end of April, at 6 per cent.
At the end of January the firm had been the seventh-largest position, accounting for 4 per cent of the portfolio.
“We like the dynamics of the healthcare sector,” Ms Boyle said. “We think the companies involved save and prolong lives, and that is pretty fundamental.”
Novartis shares were weak in the early months of 2016, dropping 20 per cent by April 1 before rebounding slightly last month.
Ms Boyle remained confident in her position despite headwinds including the threat of regulatory intervention in the US.
“Novartis has a good business line in generic drugs and eye care, and the US is not the biggest market for it. It had a 4 per cent dividend yield along with good news on products so we expanded the holding,” Ms Boyle explained.
Healthcare now accounts for 21.5 per cent of the fund. The 32-stock portfolio also holds Becton Dickinson, Medtronic, Roche and Johnson & Johnson, with only the latter not featuring in the top 10.
“Healthcare is profitable, cash-generative and unleveraged. Everything we like,” Ms Boyle said.
The fund’s largest sector exposure remains consumer staples, however. Procter & Gamble became the fund’s latest addition, and its 15th consumer-focused stock, last August, as the manager took advantage of continued share price weakness.
Ms Boyle said: “It’s been a business that has struggled for a number of years but its share price got low enough to warrant investment.”
The stock reached its lowest point in almost four years on September 14 but since rallied 15 per cent.
The fund also placed more money behind Alphabet, the owner of Google. Despite the firm coming under criticism for misaligned investment and the opacity of some underlying businesses, Ms Boyle said she remained positive on a long-term view.
“We like the way it is run. It is opaque but this is an issue with a lot of companies,” she added. “It trades on 20 times next year’s earnings, and is a completely different prospect to the other Fangs [Facebook, Amazon, Netflix and Google]. It has been weaker so we added to the position.”
However, she acknowledged the stock was now raising a few valuation concerns: “We’re always thinking about both sides of the value and quality coin,” Ms Boyle said. “Paying 20 times earnings and a 5 per cent free cashflow rate might be too much, so we would like it to be cheaper, but we don’t think it is over-valued.”
“Valuation overall is an issue. With the cheap money environment we have been living with, these kinds of companies have seemed good to own but, over the long term, it’s right to let them do what they do.”
Ms Boyle’s fund has returned 31 per cent over three years compared with the IA Global sector average of 16 per cent, according to FE Analytics.
