Nick Ford and Hugh Grieves, who run the £322m Miton US Opportunities fund, are focused on companies with exposure to the US domestic earnings as they search for growth.
The fund has returned 99 per cent since launch in 2013, compared with 90 per cent for the average fund in the IA North America sector in the same time period.
The managers said: “US economic fundamentals remain exceedingly sound with economic growth accelerating from a minor slowdown in the first quarter to reach 3.1 per cent in the second quarter, the highest quarterly growth rate since the start of 2015.
"The economy continues to add workers at a healthy clip and we expect to see the tighter labour market feed through to higher wages, which in turn will flow through to higher consumer spending, boosting the economy further.”
The fund managers are wary of the investment case for the large US technology stocks, such as Amazon, Google and Facebook.
They said the likelihood is that US interest rates will continue to increase.
The managers said this could lead to under performance for the big technology businesses because in most cases they do not pay a dividend yield.
Higher interest rates would be likely to lead to higher bond yields.
The managers said the recent weakness of the US dollar, even as interest rates are rising, is bad news for the profits of the large multi-nationals on the stock market who trade globally and would find the goods and services they sell have become more expensive.
A weak dollar would also boost the earnings of US small and mid cap companies, according to the fund managers, because imported goods from global competitors will become more expensive.
The fund managers believe domestically focused stocks will outperform as the dollar weakens.
The largest investment in the fund is Eagle Corp, a mid cap building materials company.
Ben Preston, who runs the £25m Orbis Global Equity fund, said price, rather than growth prospects, is the decisive factor in determining the returns available from a stock.
He said the valuations of some of the largest technology companies are unattractive.
Instead he is finding value among companies such as Paypal, which he said the market is presently pricing as though it is a provider of old technology which has been superseded by more innovative products, but Mr Preston said Paypal’s technology has evolved, but the share price doesn’t reflect this, creating an opportunity.
Brian Dennehy, who runs IFA firm Dennehy Weller in south London, has long been cautious on the outlook for the US market.
He believes the mid and small cap shares will lose money over the next five years, but the losses will be less than those of large cap US shares.
david.thorpe@ft.com
