Artemis UK special situations manager Derek Stuart says he is increasing his exposure to companies that are cash generative and can cut costs and pay down debt in the current low-growth environment.
Stuart (pictured), who runs the £1bn Artemis UK Special Situations fund, says he does not expect growth to rise in the UK, US or Europe for the forseeable future.
He says: “There is a big issue out there because the UK Government wants banks to lend and companies to spend more money, but they look at the macro environment and think it is too uncertain. The mess that the UK, US and Europe are in will not change for a number of years because the quantum of debt is so high.”
Stuart says he is buying businesses that are showing clear signs of helping themselves.
He says: “I like businesses that have a high degree of self-help and those that can take out cost and pay down debt. For example ITV cames out with a great set of results and also mentioned moves to cut costs.”
City Asset Management head of research James Calder says: “Self-help companies are attractive, however I am currently worried about valuations of defensive cash generative companies, as they are starting to look expensive. However, it is not a re-run of the tech bubble as these companies have solid business models.”