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Fund chiefs optimistic on UK outlook, QuotedData says

Fund chiefs optimistic on UK outlook, QuotedData says

Source: http://sharecast.com/news/fund-chiefs-optimistic-on-uk-outlook-quoted-data-says/22009157.html

Following is a round-up of views on the UK’s macroeconomic outlook from the chairmen and investment managers at some the UK’s leading investment companies as collated by QuotedData at the end of July:

We have seen over the past year a rapid recovery of the UK stock market with positive signs of economic growth in most sectors of the UK economy. Identifying value follows the broad rise of the market over the past year which has accentuated the challenge to find attractive companies, trading at discounts to private market value, as company share prices continue to rise. – Harwood Capital as managers of Oryx International Growth

The companies invested in by the fund should enjoy further increases in sales and profits. The background environment is very positive for a portfolio of “UK centric” companies with low inflation, rising employment and greater confidence, both consumer and corporate, anticipated. However the problems of the Eurozone may continue to act as a potential drag on UK growth. In time we can expect these to diminish and better performance to return. – Lord Lamont of Lerwick, Chairman, Smaller Companies Dividend Trust

We are now seeing growth in most sectors of the economy and also geographically across the UK. This in turn is leading to increasing employment and strong GDP growth. Compared to the members of the Eurozone the UK is becoming the place to do business and to produce products. – From David Horner and David Taylor, managers of Smaller Companies Dividend Trust

Stock markets have recovered strongly since the depths of the financial crisis in 2009. But how much of this performance is due to the monetary policy of central banks is not yet clear. However, it is encouraging that the UK is one of the fastest growing economies in the developed world and, having built up cash over the past few years, companies are now starting to invest and levels of corporate activity have increased. This should create a positive background for markets. – From Simon Miller, Chairman, Artemis Alpha

We remain rather surprised that investors are happy to brush aside any number of
negatives. We face widespread geo-political tensions, increasing government debt, the prospect of reversal of monetary easing, historically high equity valuations and the indecent haste with which private equity groups are offloading their holdings onto the public market. The opportunity set amongst out of favour companies seems be to more fertile than it has been for some time which offers some encouragement, but we must be careful not to pull the trigger too quickly. – From Alastair Mundy, manager of Temple Bar Investment Trust

Over the past few months we have seen a reversal in the performance of momentum driven stocks with sustained profit-taking after extended rises. Large cap fund managers appear to have been sellers of mid-cap stocks. News-flow from our holdings has generally continued to be positive with those largely exposed to the UK economy faring particularly well. This includes house builders and other UK consumer exposed companies. We expect these and similar companies to continue to trade well. Share prices of housing related stocks have come under pressure as interest rates look set to rise. – From Mike Prentis and Ralph Cox, managers of BlackRock Throgmorton Trust

In 2010 [valuations] were still affected by the global financial crisis and recession. Subsequent good performance, which has fed through to higher valuations for small companies, suggests that a lower potential return will be available from the asset class taken as a whole and that it will be more challenging to deliver future returns on the scale enjoyed by investors in small companies over the last four years. – From Jonathan Cartwright, Chairman, Aberforth Geared Income

Other things being equal, the very strong balance sheets enjoyed by small companies would merit a higher PE. But it is difficult to argue that small companies as a whole are now cheap, at least on the basis of historic PE ratios. Over the medium-term, stronger than average profit growth should be achievable if and when Europe recovers properly, but over the long-term profit progression in line with nominal GDP is probably not too far from the mark. On balance, from a starting dividend yield of 2.4% modest single digit total returns for small companies look likely over coming years. – From the managers of Aberforth Geared Income

The good performance of the UK economy, perhaps too much assisted by a strong housing market, has brought forward the possibility of a rise in interest rates with a resulting strengthening of sterling. Euroland remains with its problems, geopolitical tensions are bubbling away while UK politics will increasingly be a factor on the UK stock market’s sentiment as we enter the last year of our fixed term Parliament and also face the Scottish Referendum in September. – From Hugh Twiss, MBE, Chairman, Henderson High Income

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