UK equity star starts year on high-conviction footing

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JO Hambro’s Alex Savvides has started the year on a leaner footing having cut 10% of the holdings of his €135 million UK equity fund.

In his monthly update, the Citywire AAA-rated manager said he ended 2013 by selling some long-term holdings and is concentrating on some of the larger positions in the fund.

The JOCHM UK Dynamic fund, which is UK-domiciled but registered in several European countries, now has 45 holdings in total.

‘Having sold quite a few longer-term holdings in 2013, we go into 2014 with a slightly smaller portfolio of stocks and slightly larger positions in our higher conviction ideas,’ he said.

‘[These] remain 3i, QinetiQ, Segro, Aviva and Xchanging, all of which have a substantial programme of internal change aimed at generating more cash.’

Private equity group 3i is the largest position in the fund at 3.4%. Savvides said it was continuing a strong run of performance as seen over 2013 following the start of a recovery plan.

Setting out his plan from here, Savvides said: ‘We will remain vigilant on valuation, both for existing and new ideas, and will continue to reduce positions in stocks where we feel valuations discount a substantial amount of future growth and/or margin recovery.’

Constructive on miners

Elsewhere in the fund, Savvides has sought to increase his mining exposure but is only tentatively adding to his basic materials exposure, which remains a 1.65 percentage point underweight to the index.

‘We are still underweight mining, but less so than at the start of 2013 given the prevailing price-to-book valuations and are also attracted to management change amongst a whole range of mining companies, which is sparking much improved cash generation and capital allocation policies.

‘It is still early to be overweight the sector, but we have growing positions in both Anglo American and Rio Tinto. In the oil & gas sector, we are fairly neutral, but we have been increasing our positions in Royal Dutch Shell and BP over the year.’

Healthcare remains the largest sector overweight in the fund. Savvides holds medical equipment manufacturer Smith & Nephew, British-Swedish pharma group AstraZeneca, outsourcing services group Synergy Healthcare, and pharmaceutical firm Clinigen.

The JOCHM UK Dynamic B Acc fund returned 48.6% over there years to the end of January 2014. This compares with a rise of 27.65% by its Citywire benchmark, the FTSE All-Share TR, over the same period.