Martin Currie’s Walker: Anything could happen in the next three months

With the global economy still volatile and all eyes on when the US and the UK will raise interest rates, Tom Walker, manager of the Martin Currie Global Portfolio trust, is not taking a strong view on the market at present.

“Anything could happen in the next three months,” he says, and amid this uncertainty, he is not using gearing, although the £169m trust has the capacity to do so.

The portfolio is essentially a stockpicking fund and aims to achieve long-term capital growth above the FTSE World Index, which Walker says differentiates it from some of its peers with a UK benchmark.

A positive effect of the market volatility is that good-quality stocks have been oversold, Walker says.

He mentions microchip maker Arm Holdings. “Smartphones are Arm Holdings’ original market, but there has been a slowdown in China and China is important for smartphones.” August was “a palatable time to buy [the stock]” and the fund has taken a 1.6 per cent position.

“Arm Holdings is getting into the internet server market, which is a new area of growth. It has been a highly-rated stock and having been at 25 times earnings there was an opportunity to buy.”

He has also bought a 1.5 per cent position in Crown Castle International, a US company that owns and leases telecom towers to mobile network operators and whose growth is “capitalising on the demand for video streaming. The beauty of the company is it has long-term contracts, barriers to entry and fixed costs.

“Interest rates are unlikely to rise much, and over the long term not much at all. The 30-year-rates are the same as they were a year ago which is good for a company like Crown Castle with fixed costs.”

Recent portfolio purchases have been funded by the sale of some industrial stocks. “We are concerned on the industrial space. There has been a dramatic slowdown due to the end user demand drying up.”

The manager has sold out of United Technologies, owner of lift maker Otis, following a slowdown in the UK and North America; also of industrial group Pentair.

“Pentair had been growing its top line following its merger with Tyco, but a lot had fed through and the revenue line was shrinking,” he says.

The fund’s performance so far this year has been “in line with the index”, Walker says. FE data shows that year to date the fund is down 1 per cent, compared with the FTSE World index drop of 0.7 per cent.

Emerging markets stocks – 2.7 per cent of the portfolio – have proved both a positive and a negative.

A US rate rise could cause weakness in emerging markets, Walker says, in which case he may top up the weighting.

The fund’s largest regional allocation is to North America at 52.2 per cent. This is an underweight compared to the benchmark at 54.4 per cent but Walker points out that a company such as construction rental firm Ashstead, though UK-based, derives 90 per cent of its earnings from the US.

He is sanguine on the US outlook. “I have a long history of managing money in North America; there are great companies in North America,” he says.

Standout stocks in the portfolio include fashion retailer L Brand which, he says, has “keen pricing and strong supply chain management”, BG Group, which has performed well following the Shell bid, and Mitsubishi, which has strong Japanese market performance.

Walker has managed the trust, launched in 1999 following a restructuring of the Scottish Eastern trust, since 2000. It is a focused portfolio of 60 stocks and while its main objective is growth, it currently offers a 2.3 per cent yield.