31st July 2013
European firms able to prosper by exporting in a sluggish world economy form an increasing proportion of the stocks in the Carmignac Investissement portfolio.
In a note issued this week, the fund manager says growth stocks with good visibility account for 30.5% of the portfolio.
“This new theme mostly includes European large caps such as Novartis, SABMiller and Nestlé, although there is also room for US companies Yum! Brands, Mead Johnson, Microsoft and Las Vegas Sands,” says the note.
But it has also shifted its approach to emerging markets. “The shift in US monetary policy in May prompted us to make some changes within the Carmignac Investissement portfolio. For example, we neutralised all of the fund’s exposure to emerging currencies. We also reduced our investments in those companies and emerging countries most vulnerable to reduced liquidity.”
The emerging market consumption theme has continued but was trimmed back slightly in Carmignac Investissement to 24.1%.
“In particular, we completed several sales in sectors most vulnerable to monetary tightening. These sales relate to stocks in the financial and property sectors in particular. We plan on further reducing these holdings as and when opportunities arise for those stocks that appear to be under the greatest threat, but do not expect to go much lower than 20% as growth prospects in this investment universe seem attractive at current valuation levels”.
The note says the Carmignac Investissement energy component remains stable at 13.2%. It says: “Cameron International, a leader in offshore deepwater drilling equipment, and Oryx Petroleum, which has promising exploration possibilities in Kurdistan, were added to the portfolio while our position in Ensco was closed and our investments in Anadarko and Halliburton reduced”.
It also favours Japan. The note says: “The Japanese reflation theme continues to grow, reaching 10% of Carmignac Investissement’s assets – Japan’s reflation policy is providing economic and monetary support unrivalled elsewhere in the world. Japan is the developed country with the strongest growth yet its equities are still trading at only 13x forward earnings for 2014, well below their historical average. We are invested in the relaunch of Japan’s nuclear programme, having introduced Kansai Electric Power and Kyushu Electric Power to the portfolio. In retail, we opened a position in Seven & I Holdings and reduced Toyota Motors. To the 10% of stocks held in the portfolio, we can add our Topix purchases (3.7%)”.
The fund has increased its US growth weighting to 10%. It adds: “We strengthened this theme in a climate in which US growth, helped by the country’s industrial revival, is a heavy trend that should be able to continue benefiting the US equity market, making it less vulnerable than others to monetary pressures. AIG in the insurance sector and Starwood Hotels were added while the position in Comcast (cable operator) was strengthened. On the other hand, we closed our position in Morgan Stanley”.