Growth will take a while to dominate market

“People are saying that the growth theme is not yet happening, but this is not a short-term view,” he says.

Sergeant has already taken favourable positions in fast growing sectors in his Growth fund and the Special Opportunities fund. SGAM as a whole is also moving toward buying more growth companies.

Sergeant’s funds are currently significantly overweight in the growing technology and software sectors, holding stocks such as Vodafone and Lastminute.com. “We like internet survivors. Lastminute.com is currently out of favour, but is fundamentally cheap.” As many companies are also generating a significant amount of cash at the moment, Sergeant also favours companies that are able to benefit from reinvestment.

Commodities, including mining and energy companies remain particularly out of favour with Sergeant, as they have excess levels of profit. For the same reason, he adds that he is also not currently interested in adding any of the companies that recently joined the FTSE 100 to his funds.

Valuations between growth and value stocks have been converging lately, says Sergeant; however, equity income remains the industry’s consensus favourite for the time being.

Value and income stocks have been in favour for the last five years, according to Sergeant. Net retail sales of Equity Income funds totalled £1.75bn last year, with funds in the growth-orientated All Companies sector selling only £217m, according to the Investment Management Association.

l See cover story, page 20.