UK industrial sector tipped as right place to invest
INVESTING in shares in UK industrial and manufacturing companies represents a great opportunity, according to one of the UK’s top portfolio managers.
James Henderson, who manages four investment trusts worth more than £1.35bn for Henderson Global Investors, said he has a simple approach to investing.
“The reason I have industrial shares is purely because I think they are going to go up,” he told an audience of Yorkshire business leaders and investors at a breakfast seminar in Sheffield organised by TheBusinessDesk.com in association with Investec Wealth & Investment. Also speaking at the event at the Mecure St Paul’s Hotel was economic expert Chris Hills, chief investment officer at Investec Wealth & Investment.
Mr Henderson, divisional director, UK investment for Henderson Global Equity Team, gave the audience a portfolio manager’s view of UK industrials and explained why the sector had been unloved by investors.
He said that over the last 10 years shares in the UK industrial sector have significantly outperformed the FTSE All Share Index but stretched over 20 years from 1993, they have underperformed against the index.
“Why don’t people want industrials? Some of it is a macro argument, the other is the historic view over 20 years – the baggage we still carry. People believe in the cyclicality,” said Mr Henderson.
TheBusinessDesk.com is holding a similar event in Leeds in May featuring Mr Henderson and Mr Hills.
The breakfast seminar is on Wednesday 15 May from 7.30am to 9am at the Doubletree by Hilton, Granary Wharf 2 Wharf Approach, Leeds LS1 4BR.
For more information or to register to attend please email stephanie.higgins@thebusinessdesk.com or telephone 0113 394 4321
Mr Henderson added: “This slowdown hasn’t been about industrials, it’s about the consumer addressing their debt position and the financial services industry addressing their issues.
“Rolls-Royce is the great success story of UK industry and companies alongside them have benefited. Rolls-Royce shares have gone up 10 times over the last 10 years – I shouldn’t have sold them!
“The Chinese are not going to be able to develop an engine like the Rolls-Royce Trent jet engine – it will be a long time before they have an aerospace industry.
“So many different people are now buying the R-R engine, there is real depth to the order book which stretches to 2018/19,” he said.
Mr Henderson that the UK automotive industry is undergoing a “real renaissance” with car production doubling between 2010 and 2015, with over 80% of productionfor export.
He said that car manufacturers like Jaguar Land Rover might be foreign owned now but there are huge benefits for their UK suppliers.
He cited the example of A&J Mucklow, a quoted industrial property company in the Midlands, whose share price has increased since 2010 as industrial rents have risen and demand for space has increased.
Mr Hills of Investec Wealth & Investment, said that the firm’s portfolio balance was based on a number of economic scenarios.
He said the central scenario, of which there is a 75% probability, is that “politicans get it right eventually, growth is sluggish in the developed world, equities are still cheap, but sovereign bonds expensive”.
Mr Hills said the two other possible scenarios, were for double dip and stagflation.
He said the double dip scenario – “with the debt overhang causing another recession, the EU splinters, equities are priced too high and top quality bonds are a decent value” – was only a 10% probability, “that is the lowest percentage it has been for 18 months”.
He added that the stagflation scenario is a 15% probability, “similar to double dip except that inflation regains upward momentum and cash, infrastructure and gold present the best havens for investors”.
