Wintle swaps energy and tech for banks in Neptune US Opps

Neptune’s Felix Wintle has been adding to national and regional banks in his £464m US Opportunities fund, cutting technology and energy stocks after a strong run.

In a reversal of his positioning last summer, the manager has been adding beta to the portfolio, moving from an underweight in banks he held throughout 2011 to a neutral position at about 16% of the fund.

He said the ECB’s long-term refinancing operation has given him confidence that banks will not be allowed to fail, and has dramatically lowered volatility and improved liquidity in the market.

“The likelihood of any one bank going under is now massively reduced and almost eliminated because the ECB will act as a backstop. We have bought two investment banks and real estate play CBRE.”

He also likes regional banks for their attractive valuations and accelerating loan growth.

Meanwhile Wintle has cut his technology position by 6% taking the total weighting to 12% with the sale of Intel, which returned 25% for the fund, IBM and Mastercard.

“They have done well for the long term and we thought it was better to take profits and look elsewhere. These stocks are overowned and somewhat long in the tooth,” he said.

Wintle has also taken his energy exposure down to 5.7%, an underweight position, with the sale of strong performers ExxonMobil and Chevron.

“We have been trying to get exposure to the nuts and bolts of the economy by increasing our weighting to the housing market and industrials,” he added.

Many of these position changes have been reflected in the £16m US Max Alpha fund, he said.

In July the manager sold down banks including JPM and Citigroup, pointing to low interest rates and little capacity for loan growth, as well as a drag on the fund’s performance.

The manager said the fund had a disappointing fourth quarter, undershooting the S&P 500’s 12% return for the period to deliver 7.55%.

“There was a huge rally in October which we did participate in, but we were unable to keep up. We have had less beta and have been more cautious which has caused underperformance."

Wintle said the last 15 weeks has seen a package of encouraging economic data from the US, paving the way for a strong 2012. He pointed to consumer confidence, PMI, payroll, manufacturing, auto sales and retail sales data, all of which have been stronger than expected.

“Even housing appears to have found a floor – stocks peaked in 2005 so it has taken a long time for them to start to perform, but new orders are up 20% and we are seeing stabilisation, which is the first step to recovery.”

With 2012 being an election year, this has set the stage for equities to outperform, Wintle said, highlighting historical data showing 12 out of 15 previous election years saw strong markets because of supportive government policy.

US Opportunities has fallen 10.9% over the year to 6 January, ranking it in the fourth quartile of the IMA North America sector, and has returned 20.9% over three years compared to an average 34.1%.

However, US Max Alpha has delivered 45.9% over three years, ranking it in the first quartile of the peer group.