Simon Murphy, Old Mutual UK Select Equity Fund

Overview of markets as a stock picker
• Markets have continually switched between favouring risk and risk avoidance
• Difficult for stock picker trying to find good fundamental stocks and for confidence in equity investing
• Important to remain close to companies you are invested in, maintaining regular dialogue with company management

RPS – one example of a favoured holding
• Active position in RPS – a consultancy to energy businesses
• Looks at environmental considerations of big energy projects
• Commercial building consultancy, water utility infrastructure consultancy, assessing geographical requirements around developing big energy projects

Alternative to a straight energy company because it does not play on one particular resource
• Burberry – a growing position in spite of its cyclical nature
• Burberry – been adding to recently in spite of portfolio’s cyclical bias
• Is a stock specific decision rather than a sector bet
• Company is taking greater control of its brand across all geographies – eg China, Spain, Japan
• Capable of strong medium term growth irrespective of short-term cyclical considerations

Favours specific life assurance stocks
• Portfolio has exposure to Legal & General and Prudential
• Sector has been unfairly sold off, tarnished by other areas of financials ie banks
• Life assurance companies have stronger balance sheets than last crisis and compared with the banks
• L&G and Pru have little exposure to European sovereign debt
• Both companies’ shares not sold down quite as aggressively as banks but have reached attractive levels

Outlook for UK equity valuations
• UK equities are looking cheap given strength of corporate balance sheets, shape of company finances and profitability
• Expect the global economy to continue to muddle through – it will be slow, cautious growth
• As big macro worries subside and investor sentiment improves equities will look increasingly cheap, markets will make progress and valuations will rise

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