Mott has lifted his exposure to banks from 22 to 25 per cent despite having seen the original overweight stance to mega-caps actually hit the fund due to the recent volatility.
Mott says that banks do offer long-term value and that because there is so much publicity surrounding the sub-prime crisis it is unlikely that firms are harbouring balance sheet holes that have yet to be taken into account by the market.
He says: “Everyone knows that there are problems in the asset-backed securities market but no-one knows where the real problem lies and how concentrated it is. Consequently, the shares of all banks reflect the worst case. Although earnings will undoubtedly suffer, this is discounted in current ratings whilst the yields available are very attractive against not only the equity market but also against the yields available on cash and bonds.”
Mott has also raised his exposure to insurance companies to 10 per cent as well as to stocks outside the FTSE100 from single digits to 18 per cent.
Mott says: “This decision has largely driven the outstanding performance of the fund during August, with a number of these stocks rising by 10% or more. Because of this rise, these stocks are no longer the focus of our buying attention, although of course we will be happy to revisit them if such weakness occurs again.