PSigma fund manager Bill Mott believes the next 12 months will see investors become yield- hungry as we see a return to the “nifty 50” market.
Mott also argues that now is the right time to withdraw quantitative easing.
He says companies which maintained or improved their dividends in the past two years are unlikely to cut them now.
He says: “There are a number of companies which currently yield significantly more than 10 year gilts and we believe that these companies will undergo positive re-ratings.”
Mott considers we will see a return to the nifty 50 style of the 1960s and 1970s when the 50 most popular large-cap stocks led the market and rewarded a buy and hold strategy.
“These companies will be able to deliver this superior growth because of their high geographic exposure to faster-growing areas of the world, or because of the industry in which they are operating, or because of their superior technology, or management ability.”
Given that sterling is likely to remain weak for some time, Mott currently has a very overseas-orientated portfolio with around 9 per cent of his company allocated to internationally priced overseas companies where a restricted number of UK companies fulfil the team’s requirements. Mott says the UK will have “a much bigger hangover from the credit boom” given its poor position in the economic landscape.
He adds: “In our view, quantitative easing should now be withdrawn. It has facilitated some refinancing of bank debt by large corporations but only at the expense of an unnecessary rise in asset prices which increa- ses the risk of inappropriate consumption by the private sector.”