Speaking at a Fidelity conference in London on Friday, Shah said the panic had created good bottom-up stockpicking options. He has moved from being underweight in the banking sector to an overweight position, adding to financials following de-ratings in the sector.
He said: “Right at the start of the year, I added to franchises like Provident Financial as well as UK property stocks which got de-rated on the back of the concerns we saw earlier this year. I have also added to insurance firms, with the potential departure of AIG opening up a more competitive environment. The move in banks has been through repositioning in firms like HSBC as well as recently adding to more controversial names like Lloyds, HBOS and Barclays. Overall in financials, I am now 700 to 800 basis points overweight.”
Shah said spreads are now huge between the most expensive and cheapest sectors, suggesting that the stockmarket is already discounting a recession in a lot of sectors. He has tried to avoid areas where he sees significant earnings’ risk.
Shah said his fund has a heavy large-cap bias but that could change in the coming months. He said: “As markets continue to bottom, opportunities will arise in the small and mid-cap arenas and we will be looking for them.”