PA ANALYSIS: Yarrow, Stick and co leading defensives revival

Added 13th March 2017

Much has been made of UK investors’ supposed rotation into cyclicals, but it has been noticeable how more defensively minded stockpickers have returned to form in 2017.

PA ANALYSIS: Yarrow, Stick and co leading defensives revival

Among the UK Equity Income funds riding this year, high having beat the sector average, include options from Evenlode (Hugh Yarrow) and Rathbones (Carl Stick), while the likes of Woodford Investment Management (Neil Woodford) and Troy Asset Management (Francis Brooke) have also seen performance recover.

These a sense of familiarity looking at these funds’ top-10 holdings with the likes of AstraZeneca, GlaxoSmithKline, British American Tobacco and Unilever dominating proceedings.

While it has long been known how income funds cluster around the same yielding mega caps, that these have come back into favour will surprise many who anticipated continuation of the cyclicals revival of last year.

“The change in leadership to more defensive sectors was particularly pronounced in the UK stockmarket [in February] and this was exploited by defensive stalwarts such as Woodford, Evenlode, Trojan and Rathbones,” says Gavin Haynes, managing director at Whitechurch Securities.

“Overseas equity markets enjoyed a strong rally over February, but it was also quality and defensive sectors leading the way as bond yields across the world fell substantially.

"In the latter part of the most unloved bull market in history, euphoria is not coming from those 'cautiously optimistic' investors"

“The best performing sectors were the defensive areas of healthcare, staples, utilities, IT, which suggests that markets continue to climb a wall of worry rather than being driven by bullish euphoria”.

Presumably towards the latter part of the most unloved bull market in history, euphoria is not necessarily coming from those “cautiously optimistic” investors, rather from the corporates themselves.

According to Fidelity International’s latest analyst survey – of 146 participants - management confidence among the world’s largest companies has reached its highest level since 2014, turning from negative last year to positive in 2017.

“With cyclical forces evident across all regions and sectors, chief executive officers now regard demand-led growth as the main driver of earnings growth for their companies, whereas last year they were looking to cost efficiencies,” Fidelity said.

“This global cyclical acceleration is a rising tide that lifts all boats.”

 

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Gary Shepherd

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Gary joined Last Word Media in 2009, becoming editor of Portfolio Adviser a year later. Previously, he worked at Incisive Media with roles across its Professional Adviser, Investment Week, Bloomberg Money and Mortgage Solutions titles. Gary has been shortlisted for various awards, winning Headline Money Investment Writer of the Year in 2010.

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