Mark Lovett, the manager of the Charter European investment trust at Allianz Global Investors, has moved into black gold.
The oil sector is a favourite of mine, he says.
This reflects his positive view on the sustainability of the present value of oil and the valuations oil companies are trading on. However, higher oil pricesor the expectation of rising oil prices, also often indicate that a recovery has already happened.
Total, a France-based integrated oil and gas company, is the biggest holding of the trust, representing 5.3% of its assets.
Lovett likes the satellite industry too. I like the dynamic of the sector and what managers do to capitalise the opportunity, he says. Satellite companies SES and Eutelsat, for example, have visible business models benefiting from the excellent growth trends in the global video and television markets.
He wants the portfolio to be balanced in terms of positions across the market. The most exciting element of investing in Europe is that one can still identify global leading companies in strong growth markets at attractive valuations, which should provide long-term capital growth, he says.
While last weeks elections in Europe have caused some political uncertainties, Lovett does not expect the outcome to influence the performance of those companies owned by the Charter European Trust.
The concentrated number of holdings within Charter ensures that we only need to invest in European companies which meet those criteria.
In general, it is not his management style to have high turnover in the portfolio. Lovett says he tends to adopt a long-term approach with a turnover rate lower than the average portfolio manager.
Last year, however, he had to reposition the portfolio of the Charter European Trust. I did a lot by the end of last year to [re]shape the portfolio.
In 2007 and 2008 the fund was rather defensively positioned, with underweight positions in commodities, banks and insurances. However he then started introducing more economic sensitivity to his portfolio.
Lovett moved into early-cycle stocks to benefit from a global recovery. The chemical sector, for example, is a classic early-cycle sector. Solvay, a chemical and pharmaceutical group, and DSM, a multinational chemical company, are two examples of positions he added into the fund.
Both companies were hit hard last year, but Lovett says they have a strong core which provides him a base of cash flow and profitability. Meanwhile, deteriorating share prices have created opportunities to pick up stocks at a cheap price.
Those positions have worked very well in the portfolio. [The trust] has outperformed the benchmark, Lovett says.