Francis Brooke, who runs the £3.3bn Troy Trojan Income fund has said he is not invest in mining and housebuilder shares because he views the sectors as too volatile.
The fund manager said positive economic data from the US and other parts of the world has led to a “continuing cyclical bias” in equity markets.
He said this has helped push the strong performance of the housebuilder and mining sectors.
But Mr Brooke said those sectors are “too volatile” to be good investments right now.
His comments on the house builder sector come as one of the big property developers Berkeley Homes reported profits for the first half of the year increased by 36 per cent. It also upped its guidance for the level of profit it can achieve over the next five years.
The company said housing demand remains strong and it welcomed the changes to stamp duty announced in November's budget, which scrapped the tax for first time buyers on properties up to £300,000. Berkeley shares are up 9 per cent today, at £42.23, having been £28.79 a year ago.
Mr Brooke's desire to be on the opposite side to the market consensus view has hit his performance this year, with the Troy Trojan Income fund losing 5 per cent over the past six months to 5 December, and being among the bottom 25 per cent in the IA UK Equity Income sector over the past year.
Instead Mr Brooke has bought BP shares after a period of under performance from the stock and has been buying insurance companies, which he thinks can grow returns as interest rates rise.
The fund manager Neil Woodford is another investor who agrees with Mr Brooke on commodities.
He believes the strong commodity price performance of 2017 is the result of stronger performance from the Chinese economy.
But he said the stronger performance is the result of elevated debt levels in the Chinese economy, with the result that a bubble has been created in commodity and other markets, and when this bubble has burst, he expects commodity stocks to under perform.
Eric Moore, who runs the £185m Miton Income fund is keen on mining stocks. He said the mining companies have repaired their balance sheets and started to pay dividends, so the investment case for the FTSE 100 miners has changed markedly.
Mr Moore said miners have learned the lessons of the past, and, as a result, are not wasting capital on bad acquisitions, and this will drive returns in future.
david.thorpe@ft.com
