Money managers under the microscope
Cazenove’s Russell eyes market turning point
Cazenove’s Tim Russell, one of the UK’s best-regarded fund managers, reckons cyclical stocks — the winners in 2009 – look expensive while defensives look cheap and says he may increase his bets.
He gives the examples of Kazakhmys and GlaxoSmithKline, which are both on roughly 10 times earnings. Whereas Glaxo has tended to report results ahead of forecasts in recent years, Kazakhmys has tended to disappoint, he says.
The miner’s results are less dependable and very reliant on commodity prices, meaning it should be on a p/e of around 6 times, he thinks.
It’s always tough to call a turning point and Russell admits he got last year wrong by being too cautious on cyclicals and thus making just 0.4 pct in 2009.
But the forthcoming end of quantitative easing and recent moves by China to tighten lending could be early signs that a change is likely to take place, he believes.
Russell may have lagged other long-short funds last year but he delivered a tidy 9.4 pct gain in 2008′s turmoil, putting him ahead of the average manager over two years.
Is now the time to move out of cyclicals and into defensives?
(See also: Majedie warns of “hammering” for cyclicals)