‘The signs for a mar­ket rally are flash­ing green’

The Daily Telegraph - Your Money - - INVESTING -

In­vestors have fled Bri­tish funds in their droves as fears of a no- deal Brexit have in­creased. The re­cent mar­ket sell-off has left the FTSE 100 at a six-month low. De­spite this, James Lowen, who co-man­ages the £3.7bn JO Ham­bro Cap­i­tal Man­age­ment UK Eq­uity In­come fund along­side Clive Bea­gles, is qui­etly con­fi­dent that the wind is about to change.

He tells Tele­graph Money why unloved do­mes­tic stocks avail­able at his­tor­i­cally low prices are poised to take off.

How do you dif­fer from other in­come funds?

We are fo­cused on a com­pany’s val­u­a­tion [how ex­pen­sive it looks com­pared with his­tor­i­cal and sec­tor av­er­ages] and we tend to fo­cus on cheaper stocks.

We in­vest in firms that have some sort of tran­si­tory struc­tural is­sue, so we are es­sen­tially go­ing against the grain of the mar­ket and in­vest­ing in com­pa­nies go­ing through a tough time and that are there­fore un­der­val­ued. For ex­am­ple, oil stocks such as Shell and BP have done very well of late, but two years ago no one wanted to own them when the price of oil was low – so we try to take ad­van­tage of neg­a­tive sen­ti­ment.

For do­mes­tic stocks – al­most a dirty word at the mo­ment – val­u­a­tions are as­ton­ish­ingly low. No one wants to buy the Bri­tish mar­ket and no one wants to buy do­mes­tic stocks be­cause of Brexit.

A lot of man­agers spend too much time think­ing about the fun­da­men­tals of a com­pany and not enough time think­ing about how much they are go­ing to pay for those fun­da­men­tals.

You can find a great stock with a fun­da­men­tally good busi­ness and of­ten over­pay for it.

When do you sell stock?

We get paid a div­i­dend while we are wait­ing for these com­pa­nies to re­cover and we fo­cus a lot on div­i­dend growth. But we are also

CV: James Lowen

Mr Lowen we is s a qual­i­fied fied char­tered ed ac­coun­tant. tant. He bought his first stock at t 12 and joined New­ton In­vest­ment ment Man­age­ment ement in 1998. He holds ds look­ing for stocks that can grow at the same time. We au­to­mat­i­cally sell a stock when its yield falls below the av­er­age of the FTSE All Share in­dex, which is about 3.5pc at the mo­ment.

We are quite strict: we sell stocks and ro­tate into new ones. For ex­am­ple, this year we have sold es­tate agents Sav­ills and con­struc­tion com­pany Costain and have bought as­set man­ager Lion­trust and su­per­mar­ket chain Mor­risons.

We will also sell if we think val­u­a­tions are get­ting too high, even if div­i­dend yields are good. We re­cently sold Hol­ly­wood Bowl, for ex­am­ple, be­cause its price was mak­ing us ner­vous.

£4bn in­vestor James Lowen tells Harry Bren­nan why UK shares will go through the roof if there’s a Brexit deal

What is your out­look for the UK?

We are in a trough look­ing up­wards, so I’m quite ex­cited about our prospects. If we get a deal on Brexit, any kind of deal, it could lead to a mas­sive twist in the mar­ket where ster­ling will rally and do­mes­tic stocks will also re­cover dra­mat­i­cally.

Se­condly, if US in­ter­est rates con­tinue to go up, it will be good for banks and fi­nan­cials.

Fi­nally, we think prices sim­ply have to change. His­tor­i­cally the prices of do­mes­tic stocks have never bee been lower and we could now be at a turn turn­ing point. Val­u­a­tion drives eve ev­ery­thing at the end of the day.

A All the signs for change are flash­ing gree green and we are eco­nom­i­cally in a stro strong po­si­tion in Bri­tain, with real wag wages go­ing up.

Is the Bri­tish high street dead?

It I is deal­ing with a lot of pres­sures, but some com­pa­nies can weather the storm. We avoid book­mak­ers

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