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Grand National Special: investment bankers, dark horses...

What do three wealth managers feel are their investment bankers, dark horses, all talk no walk, falling at the first and their grand national pick

The most famous horse race in the UK, the Grand National, gets under way this weekend. To celebrate, we asked three wealth managers for their thoughts on which investment sectors are running well or pulling up short at the moment, as well as who they fancy for the big race itself.

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The most famous horse race in the UK, the Grand National, gets under way this weekend. To celebrate, we asked three wealth managers for their thoughts on which investment sectors are running well or pulling up short at the moment, as well as who they fancy for the big race itself.

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Banker:

There is a lot of uncertainty around at the moment, but more than that, a lot of binary outcomes are yet to be decided. Therefore our favourite area of investment is less of a specific asset class or sector, but in to investments that have low sensitivity to both the as yet unknown Brexit outcome and also to global growth sentiment that seems so dependent on US trade talks at present.

Dark Horse:

We have had a lot of success over the last nine months or so via Asian credit. The Muzinich Asian High Yield fund that we use for example is up 10% since Mid-July of last year and wouldn’t be an obvious consensus trade.

All Talk, No Walk:

Over the last 12 months or so I feel I’ve heard and read a lot of investors talking about absolute return funds and how they are using them to navigate volatility and uncertainty. But the IA sector is down over that period and finding a good performer is hard. Many are obviously less than ‘absolute’ and those that are, are finding positive returns hard to come by.

Falling at the first:

The UK high street. Very few retailers are performing well in the sector at present, even the previously formidable Majestic Wines has succumbed to both a downturn in physical retail and a structural shift to online, even in the alcohol sector.

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Banker:

I’d be happy to look for some defensive value with oil & gas producers at the moment. Interest rates aren’t going up and that is going to put a premium on yield. Sector giants Shell and BP both catch the eye with forecast yields of 5.9% and 5.7% for 2019 respectively.

Dark Horse:

Real estate investment trusts are tempting as a contrarian pick. A lot of the big names trade on huge discounts to NAV. Some – any – visibility on Brexit would help and could open the way to M&A within the sector.

All Talk, No Walk:

I’d be wary of both electrical and electronic equipment and technology hardware. Both have done well in 2019, but Renishaw’s profit warning bodes ill and news flow from the Asian sub-supply chain is not great, as Samsung’s Q1 trading alert suggests.

Falling at the first:

Media covers a range of disciplines, but it may be one to avoid given the ongoing pressure on the business models of Pearson and RELX and the threat posed by the internet and open educational resources.

 

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Banker:

It’s not the guarantee Red Rum once was at Aintree, but we believe the UK is undervalued. Yes, we accept Brexit has a number of fences to jump, but there is a huge upside if any deal happens. We would be looking towards the likes of special situations/recovery type vehicles.

Dark Horse:

Few picked Mon Mome to win at 100/1 a decade ago but every now and again a clever jockey can navigate the course and spring a surprise. Despite low growth and fears of recession, we feel there are numerous talented, high conviction managers in Europe who can find bargain basement stock prices to take advantage of.

All Talk, No Walk:

In 2010 I had the joy of betting on King John’s Castle (a previous runner up), however, when the starter waved the flag the horse refused to run – I was not amused. The sector I believe needs to do more is global emerging markets – simply because not enough managers are showing up on our performance radar.

Falling at the first:

The failings of the targeted absolute return sector are well documented. There are just too many funds doing different things in the sector, a number of which are not suitable in our eyes. These funds were meant to be the big winners post credit crunch, but they’ve managed to do a Devon Loch
since then.

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Grand National Pick:

For the actual Grand National, my main tip would be Willy Mullin’s Rathvinden and at longer odds, Rock The Kasbah if the ground is good or Ramses De Teillee if on the softer side.

The ground will be a key factor, so keep an eye on the weather. Last year’s winning trainer Gordon Elliott could have about a dozen runners, so his jockey bookings will be important. They are just two of the bigger variables. If the rain stays away and the ground is good, Tiger Roll could take some stopping, but I’m not taking him at such low odds in a 40-horse race. So, in the interest of finding some value: if the rain stays away and the ground is good, Mall Dini appeals; if there is some rain and some juice in the ground, Monbeg Notorious could be a punt.

The sportsman in me would like to see Tiger Roll retain his crown, but in the search for value (and having watched last year’s race) I am going for 2018 runner-up Pleasant Company to go one better.

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