PSigma Income fund manager Bill Mott has begun to trim exposure to cyclicals after a number of stock...
PSigma Income fund manager Bill Mott has begun to trim exposure to cyclicals after a number of stocks in the portfolio staged sharp performance spikes over recent months.
While noting a sharp improvement in investor sentiment recently, Mott says in the same way as cyclicals became "ridiculously oversold" at the bottom, investors could get carried away on the perceived strength of economic recovery.
Mott has begun to reduce exposure to a number of top performing stocks - including Travis Perkins, which has moved up from 213p on 5 January to 790p, and Enterprise Inns, a stock up from 30p to 178p in just over three months.
"As always, stock markets tend to overshoot and the performance of economically-sensitive stocks may have further to run," Mott says.
"However, as the market continues to rally, we will gradually reduce our exposure to cyclicals and increase our weighting in companies which will deliver superior growth in a tough, but not impossible, environment.
"This superior growth could be due to either the companies' geographic exposure, the industry they are in, or the internal dynamics of the company."
Mott says as the classically defensive sectors and stocks have hardly participated in the rally, he will allocate to the likes of AstraZeneca, GlaxoSmithKline and tobacco names on valuation grounds.
"In short, over the next few weeks, we believe it will be possible to refocus the PSigma Income fund towards 'best of breed' companies which can deliver superior growth relative to their peer group," he says.
