Jupiter's Undervalued Assets unit trust, launched last week, is running with a portfolio of around 5...
Jupiter's Undervalued Assets unit trust, launched last week, is running with a portfolio of around 50 stocks with a focus on transport and housebuilding sectors.
The fund, which is being run by Adrian Paterson, looks to invest in UK stocks which have been undervalued by the market in the wake of the boom in technology, media and telecoms stocks. Paterson is also favouring sectors including engineering and food manufacturing.
He said: "We are looking to invest in old economy stocks which people have forgotten about which are on low P/Es. The sort of companies in the fund will typically be those which have been around for 100 years and will be around for another 100 years.
"I am favouring sectors such as housebuilders as these are not threatened by the internet and people still have to live in houses. With the engineering companies, these have been hit by the strength of sterling which I think must start to come down. In the transport sector there are several bus companies which floated on P/Es of around 15 times and are currently on P/Es of six times to seven times. This is a growth area with people being encouraged to use public transport more rather than their cars and these companies also generate a huge amount of cash."
Paterson has also bought stocks including Whitbread for its restaurant exposure and also favours P&O because of its exposure to the lucrative cruising business.
He added: "We are looking for companies with good management, good cashflow and resilience. I believe that we are looking at upside of 50% over the next 12 months in many of these stocks."
Paterson said the catalyst for the value of many of these companies being released is bid activity both from other listed companies and private equity bids.
He said: "We are already seeing quite a lot of activity with two, three or four bids a day. The validation for investing in these types of undervalued stocks is that if the City does not value them correctly then private individuals will come in and take them over."
One such catalyst for interest in the housebuilding sector has been a management buyout bid for housebuilder Fairview Holdings which was announced last month.
The company's share price rose by 27.1% on 27 April, the day the bid was announced.
Jupiter Undervalued Assets has a standard initial charge of 5.25% and an annual fee of 1.5%. IFA commission is 3% initial and 0.5% renewal on Peps and Isas. There is a 1% discount to the end of the month for lump sum investments via the Pep or Isa.
Paterson has been running the Jupiter UK Smaller Companies fund since it was launched in February last year. The unit trust is ranked 16 out of 75 funds over one year on an offer to bid basis on growth of 51.3%. Over three months the trust is ranked 25 out of 76 on a bid to bid basis on a fall of 4.3%.