JOHCM duo sees 'vicious' derating for defensives as results disappoint

Poor results from companies such as Unilever, AstraZeneca and Shell last week showed the valuation gap between defensives and cyclicals is closing in a "vicious" fashion, according to JO Hambro Capital Management's James Lowen.

The senior fund manager on the £919m UK Equity Income fund, alongside Clive Beagles, said the portfolio is very underweight defensives as indicators are pointing to an improved environment for cyclical stocks. “All the defensive companies were re-rated last year and we have started to see this reverse quite viciously in the last 14 days. The valuation signals are very powerful. We are starting to see these valuation extremes unwinding with the disappointing results from companies such as Unilever and AstraZeneca.” Lowen added if the macroeconomic environment stablised from here, some ...