Even fund managers are having a hard time picking the best sectors over the next 12 months amid mark...
Even fund managers are having a hard time picking the best sectors over the next 12 months amid market turbulence. However, pharmaceuticals is one sector with long-term growth according to many interviewed.
With the current state of the markets, which fell as much as 3% on 14 March, Neil Cumming, UK fund manager at Aberdeen Asset Management said it was impossible to tell which sectors would outperform.
James Dalby, head of research at Bates Investment Services, says: "We're not going to see any sustained movement upwards until at least the second half of this year."
Mike Owen, joint managing director at PlanInvest, says because of a possible recession looming, investors should invest in defensive sectors such as food processing and pharmaceuticals.
Pharmaceuticals come out top
Most private investors (35%) at Investor's Week's recent Investor 2001 conference in London felt pharmaceuticals would be the best performing sector this year, followed by financial services and banking (23.4%) and leisure and entertainment (13.2%).
Richard Buxton, head of the UK equity team at Baring Asset Management, said the innovations arising from the human genome project would benefit pharmaceuticals companies.
"In the short term, this offsets some of the patent expiry issues, though tactically, because of that, we still prefer some of the emerging pharmaceutical companies the Shire Pharmaceuticals and the Celltechs of this world. We are around neutral on the sector at the moment but in the long term, this is clearly a growth industry."
Owen said that in the pharmaceuticals industry we would see companies such as Glaxo SmithKline, and some mid-cap companies such as Celltech, offering quite good value. He also said that the UK's blue chip companies should perform quite well. He recommends financials as well as oil sector businesses. "Companies such as BP and Shell are fairly solid shares to hold," Owen said.
"Oil is the last of our big four sectors in the UK. If we are right that you are going to have a higher trend global growth rate then there is likely to be a higher trend oil price as well.
"This might represent opportunity for unrecognised growth potential. In the short term, we are around neutral but if the oil price drags the sector back we would be looking to pick up more. From a bottom-up perspective, it is still important to be positive on the outlook," Buxton added.
Steven Whittaker, head of UK growth at Perpetual, preferred transport, construction and property. Neil Woodford, Perpetual head of income funds, said the property sector would benefit from a fall in interest rates.
Growth from mid and small cap
Perpetual said that mid-cap and small-cap companies were predicted to outperform during the year, an idea shared by Mike Owen.
"There's lots of growth from mid-cap and smaller companies. You're not going to get huge movement from the FTSE, your best gains are going to come further down the scale, although there are excellent opportunities from the smaller and mid-caps.
"However, the fall we've just seen is creating opportunities in blue chips, there's value emerging as the market falls," Owen said.
Owen is not optimistic on growth forecasts and predicts 10% growth this year. "Returns of 20% for the FTSE in one year are over. The market is extremely volatile and it's not going to get anywhere until at least the third quarter. Anything over 10% is a bonus," he said.