John Baker, whose £200m JP Morgan UK Dynamic Equity fund has delivered a positive return this year when so many other funds are in negative territory, said UK housebuilders remain a bargain.
Mr Baker’s fund has returned 1.65 per cent in the 2018 calendar year, compared to a loss of 1 per cent for the average fund in the sector.
He said a key driver of performance has been the view that the market is too negative on the prospects for UK shares.
He is invested in oil and mining giants Shell, Glencore and Rio Tinto, and said the bright global economic outlook means those companies have the potential to grow their earnings.
But he said the continued market negativity towards the UK housebuilders represents the best opportunity.
Mr Baker said: “Immediately after the Brexit referendum pretty much every analyst out there downgraded the housebuilders.
"But the companies have performed, well, one of our holdings, Persimmon, shares fell to £13 but they have now moved back to £27. The shares yield 8.7 per cent.
"The truth is the market has been negative on the house builders for a long time, and it has been wrong for a long time.”
He said fears that higher interest rates will lead to a drop in demand are misguided, because interest rates are currently at such a low level, housing affordability will not be seriously impacted by any rise.
Mr Baker has shunned the big consumer stocks, such as Unilever and Diageo, saying the valuations are unattractive.
He noted that those companies have not been growing earnings at the same pace as the more cyclical companies he has in his portfolio.
Simon Edelsten, who runs the £82m Artemis Global Select fund, said he has very little exposure to the UK, as the areas of the global economy he thinks will be the drivers of growth in the coming years, ageing populations and robotics, have little presence in the UK market.
He added that even when there are companies in the UK in the fast growing sectors, they tend to be more expensively priced than comparable companies in other markets.
Alan Miller, who runs intermediary firm SCM Private said he has been buying more UK equities, after years of having a lower weighting to domestic equities than does the market as a whole.
He said: “With my contrarian mindset, I think it is time to look at the UK afresh, especially as many investors appear to be very negative of UK equities, thereby creating an opportunity.
"They seem to have forgotten that many of the largest quoted UK stocks are simply stocks that are quoted in London, but are in fact global organisations with 75 per cent of their revenues derived from outside the UK.”
One investment house that is less keen on the current strategy being pursued by Persimmon is Aberdeen Standard Investments.
The fund managers' head of stewardship, Euan Stirling said his firm, which owns 2.3 per cent of Persimmon on behalf of its clients, had voted against the renumeration report of the company in protest at the bonus awarded to the chief executive.
Persimmon's chief executive of the company agreed to cut his own bonus to £75m from the origngal £110m, but Mr Stirling said this "does not even get close to acceptable".
David.Thorpe@ft.com
