Mott: UK pharmas may double your money in five years

PSigma’s Bill Mott has tipped UK pharmaceutical giants AstraZeneca and GlaxoSmithKline to double investors’ cash over the next three to five years.

Mott, running the group’s £430m Income fund, said the combination of high dividends and share price growth should deliver a total return of 100% to investors within the next five years.

“Pharmaceuticals are yielding better than cash and 10-year gilts, at 4%-6%, and I could easily see the likes of GlaxoSmithKline and Astra delivering a total return approaching 100% over the next three to five years,” he said.

Glaxo is Mott’s largest holding at 6.2%, with Astra accounting for 4.1% of the fund.

Elsewhere, Mott continues to shun UK domestic facing stocks, clashing with peers who are starting to see value in names such as Next.

The manager said he is avoiding consumer cyclical stocks as growth in the UK is expected to remain below trend for the next five years.

“I think the consumer is going to be under pressure for a considerable amount of time so it is too early to play the consumer cyclical stocks, and we have no exposure to this area as we would rather play the UK consumer through food retail,” said Mott.

He has instead upped the fund’s position in defensive sectors, most notably pharma, where he has added 3% since the turn of the year, taking the sector to an 11% overweight.

Mott said defensive names are less sensitive to the economic recovery and are underpriced despite posting strong earnings growth.

“We have built up a 4% overweight position in food retailers as I think the sector’s defensive nature will be immune from any future rise in rates.”

Mott added he will not build on his sole bank holding in HSBC until there is an improved outlook for the UK economy.

The manager said economic uncertainty combined with the ongoing legislative changes in the sector make it difficult to value banks, and he is running a 5% underweight to the sector.