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Stock-picking to shift away from macro-call, says Royal London’s Stewart

Royal London’s Victoria Stewart says macro-calls on stocks will be overtaken by the search for individual companies that are winners in the recovery.

Stewart, who captains Royal London’s £47m UK smaller companies unit trust says there will be a shift away from the top-down macro approach to stock-picking.

She says: “The last two years have been very much about a top-down approach, sectors and the economic backdrop. It was very much about reading the economics and the macro was important as well as financial gearing which had been a huge underlying factor company by company.

“Going forward, sectors are going to be a little bit less important and it’s going to be about picking individual companies that are winners in the recovery.”

That said, Stewart sees interesting opportunities in software and healthcare as long as individual names in the latter sector maintain a catalyst to drive performance.

She says equities overall are a much more viable investment proposition than they were six months ago.

She says: “We’re starting to get that realism coming into company strategies and share prices and that gives investors be they institutional or private a much firmer base in which to start investing back into equities because they’re not constantly trying to catch the proverbial falling knife.”

Stewart says the appeal to invest in the small companies is that they have the potential to become very large companies.

She says: “If you’re talking about going into a rising equity market and recovering economy at some point small companies do give you that possibility of a much greater return than large companies.”

As at July 22, the fund was broadly net neutral to the market down 15.3 per cent against the UK smaller companies average which was down 14.3 per cent. The FTSE all share index was down 13.2 per cent, according to figures from Financial Express.

Stewart says a muted economic recovery will come towards the end of the year.

She says: “We have a consumer and government debt in UK of monumental proportions that does have to be unwound and that will be a break on the recovery.

“Against that background it’s very much about picking the right stocks rather than it being a big macro call. A muted recovery is not a big macro driving event.”

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