Defensives offering value and scope for uplift in UK plays

ON UK INCOME

The market's preference for cyclicals and for firms with overseas earnings over domestic exposure are two stories that have become overdone recently.

As such, at the margins, I have moved my portfolio to more defensive holdings and towards companies featuring exposure to the UK consumer. A year ago, I was buying unloved cyclicals with high dividend yields, which were fairly cash-covered – even taking into account a stress-tested downside scenario for profits. While cyclicals have experienced a huge re-rating over the course of the year, there has been a relative de-rating in defensives. As such, I have been taking profits in certain cyclical companies and shifting the portfolio towards firms with defensive earnings, such as GlaxoSmith...