Coffey finds value in growth plays

RLAM head of equities Jane Coffey has urged investors to avoid the current trend of overlooking growth stocks in favour of value.

The manager says although markets have returned to more normalised conditions following last year’s value rally, growth stocks are still trading at attractive prices.

“The value stocks which have recovered are now priced on mid-cycle earnings, while with growth companies you are not paying much of a premium,” she says

Coffey, who manages the £330m UK Equity trust, has recently added Hargreaves Lansdown, establishing a 0.8% holding.

“The company has a very strong market position for Isas and Sipps and continues to show good earnings upgrades,” she says.

“Although the Government’s clampdown on tax incentives was seen as a bit of a setback, they are actually in a good position because there will be a lot of people looking for alternative ways to invest their money.”

Coffey also introduced a position in Babcock International after the terms of its VT Group acquisition were finalised.

“I bought the company on 11x earnings. Its price came down after the announcement and also the acquisition was earnings accretive, which means they have the ability to cut costs,” she says.

“The deal also puts them in a position which is much more dominant in the market.”

While the manager’s biggest outright position is HSBC at 8.3%, she is still wary on the banking sector.

“I am happy to remain underweight on banks. I like HSBC and Barclays because they are in a much better competitive position post-crisis,” she says.

“However, I am concerned about bank funding costs. The Government has supported the sector in a number of ways during the crisis. The question is what price will funding cost as support is withdrawn.”