Investors should lock in their growth profits now and gain a higher exposure to value stocks, accord...
Investors should lock in their growth profits now and gain a higher exposure to value stocks, according to Anthony Bolton, fund manager of Fidelity's UK Special Situations.
Speaking at Fidelity's investment conference last week, Bolton said in the early part of 2000 there had been some good opportunities around for value-orientated investors at attractive valuations.
Bolton currently has 75% of the Special Situations fund in old economy areas such as housebuilders, ports, tobacco, property and airlines, which have been marked down to what he considers cheap valuations.
He said: "I have particularly tried to identify old economy stocks with a new economy angle, which I think offers upside potential not yet being priced into the stocks.
"This type of situation, a growth division hidden within a less interesting business, has been one of the areas I have constantly sought out over the past 20 years of running the fund, the indirect internet plays are a version of this. I calculate about 25% of the portfolio is in stocks that are directly or indirectly beneficiaries of the new economy."
At a time when the telecoms, media and technology growth stocks have been outperforming, Bolton said as a value biased investor he has been spending time trying to identify the indirect consequences and beneficiaries of this movement.
Bolton said: "For example, for most of last year I felt the media company's internet upside was being overlooked by the market That is obviously not the case today."
Fellow Fidelity fund manager Fred Gautier, also advises caution at this time, although he does note telecoms, media and technology stocks will account for 60% of stock market profits in 20 years time.
Gautier, fund manager of UK Growth at Fidelity since March 1999, added: "As a manager of a growth fund, I am by definition happy to own companies that are knowledge and innovation based rather than asset based as world GDP is moving away from an asset-based economy.
"UK Growth has therefore little exposure to asset intensive industries such as metals and mining, chemicals or property." Gautier's approach to investment in technology related stocks has been to invest in the supportive companies such as advertising and software companies.
In the past six months the valuation gap between growth and value stocks has increased in the UK market, to a far greater point than in the either the US or Europe, Gautier continued.
This excess has been due in part to the impact Vodafone has had on the market, the scarcity of telecoms, media and technology stocks in the UK plus strong retail demand.
He said: "I do not believe investing in a growth fund requires a discipline radically different from other approaches. My view is investing for growth is investing for growth in the business but more important in the share price.
"Most believe all internet IPOs have been roaring successes but out of the 220 internet IPOs brought to market in recent times, 53% are now priced lower than their close on the first day of trading and 23% are below the issue prices - so buying into internet companies is by no means a guaranteed success and selectivity, as always, prevails."