The top five contrarian plays of the year so far
By Kristen McGachey, 16 Feb 17
From betting on Europe over the US to sticking by emerging market debt, we look at five ways portfolio managers have stepped outside the box early on in 2017.
Forget domestic companies in the US, Whitechurch’s Haynes believes there are far better opportunities in the UK smaller companies space.
Though mid and small-cap stocks have been largely shunned post-Brexit because of their respective companies’ closer ties to the domestic market, Haynes feels investors have been to hasty in their decision to write off these companies.
If the FTSE 250’s record high level this week is anything to go by, he could certainly be onto something. And the FTSE Small Cap index lifting above the 5,300 mark for the first time ever during the month isn’t bad either.
“After Brexit, the valuations of UK mid to small-cap companies have gone too far in terms of pricing in too much pessimism,” he lamented. “That is why we have seen some real opportunities to add to UK value and UK mid and small-cap.”
The Association of Investment Companies also noted earlier in the month that the UK mid and small cap trust sector looks “interesting,” despite lagging behind their FTSE 100 peers for most of 2016.
“The sector commenced the year on an 8% discount and ended 2016 on a 14% discount. This appeared to reflect a lack of investor enthusiasm for the area, at a time when UK large cap companies in the FTSE 100 were racing ahead with Forex gains especially helpful, whilst FTSE 250 companies lagged behind. However, we think that when a sector has been out of favour for a while and discounts are wide it can often be a good opportunity for investors who are prepared to get on board ahead of any re-rating.”
Tags: Bonds