Manager focus: David Cumming

British equities are rebounding strongly and a V-shaped economic recovery is within the realms of possibility, says David Cumming, the head of UK equities at Standard Life Investments (SLI).

Cumming, who also manages the SLI UK Equity Recovery fund, says: “There is no reason why there shouldn’t be a very sharp recovery. Usually when markets fall you get a sharp bounce. I find it difficult to see why it is not going to recover reasonably quickly.”

Earnings momentum is now in positive territory, while there are still a wide range of undervalued stock opportunities available owing to market dislocations, Cumming adds.

He points to several companies the market was worried about last year that have since rallied more than 100%, including Cookson, Debenhams, DSG and Xstrata. “Although we have seen a sharp rise in markets, we are still seeing distressed companies which present opportunities,” he adds.

Among the top 10 holdings in his 60-stock portfolio are GlaxoSmithKline, HSBC, Rio Tinto and Vodafone. The fund’s largest underweights to the benchmark are to the oil and gas and the banking sector, while its largest overweights are to industrials and travel and leisure.

The manager takes a positive view on the equity market over both the short- and long-term. “Although the pace will slow, over the next six to 12 months we do expect that the market will make progress and will beat bonds and cash,” he says.

He highlights the historical trend for markets to rise significantly in the two years following an economic crisis. He uses the examples of ‘Black Monday’ in 1987, the savings and loans crisis of 1990, and the technology bubble between 2000 and 2003 as proof that markets do tend to follow this pattern.

“Markets have always seen a rally greater than the fall,” Cumming says.

“The fund is positioned for an improvement in the economic outlook and markets, so if you are bearish this may not be the fund for you,” he adds.


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