Fund managers pick four of their favourite stocks for 2018

With growth in the global economy and buoyant stock markets, 2017 was a good year to be invested. The UK and US markets returned 12pc and 11pc in sterling terms, while Japan and Europe returned 16pc and 14pc.

Here are four shares that prominent fund managers are backing for 2018. Market value: £33bn Revenue (2016): £12.6bn Pre-tax profit (2016): -£4.1bn RBS enjoyed a 24pc share price gain in 2017, despite reporting a multi-billion pound full-year loss.

Alex Wright, manager of Fidelity’s £3.2bn Special Situations fund and £670m Special Values investment trust, said the uncertainty over a fine from the US Department of Justice over its role in subprime mortgages before the financial crisis had “put many investors off ”.

But at the upper end of expectations for the fine the bank would still have sufficient capital, while at the lower end it would be in a “strong position” to resume dividend payments and share buy-backs, he said. The Government still owns around two thirds of RBS but plans to reduce this.

Market value: £200m Turnover (2016): £59m Pre-tax profit (2016): £16m Somero Enterprises designs and manufactures laser-guided machines involved in laying concrete.

Simon Moon and Fraser Mackersie, managers of the £660m Unicorn UK Income fund, said: “Despite its modest size, Somero is the clear global leader in this specialist niche. The shares are not expensive, trading on 15 times earnings for 2017, with a dividend yield of 3pc and cash available.”

They said Somero’s organic growth enabled it to pay special dividends when it had built up excess cash, and US tax reforms could boost earnings.

Market value: £13.7bn Turnover (2016): £800m Pre-tax profit (2016): £181m US-listed Align Technology makes Invisalign, an almost invisible dental brace that offers an alternative to traditional metal and wire braces. James Thomson, manager of the £1.2bn Rathbones Global Opportunities fund, said: “The share price soared by 130pc in 2017 and has more than trebled in two years.”

He said Invisalign had been popular with adults for years, but has recently set its sights on teenagers – who make up 75pc of the market. The shares, listed on the Nasdaq market, are available through British brokers including Hargreaves Lansdown.

Market value: Turnover (2017):

$35.9bn (£27.4bn) £27.6bn

After-tax profit (2017):

£1.4bn Mitsubishi Electric is the world’s largest maker of electric motors, used in robots, factory automation systems, lifts and escalators.

Rosanna Burcheri, of the Artemis Global Select fund and the Mid Wynd investment trust, said rising demand in Asia was set to continue to boost the company. A recent “period of restructuring and cost-cutting” meant the company was trading on a “modest valuation”.

British investors can buy USlisted American depositary receipts via a UK-based broker as a proxy for the stock itself.

Who will be the big winners this year? James Connington asks four experts for predictions