Focus on momentum

Stuart Fowler, manager of the Axa UK Opportunities fund, is looking for companies with price momentum rather than those that are undervalued. Fowler says he had found some companies last year, such as electronics manufacturer Cookson, whose shares were priced as though their profits would never recover.
Now, he says, shares are priced closer to fair value: “I am finding it increasingly hard to find really cheap stocks, so it feels like it is time to stop looking too hard for chronically mis-valued shares and focus more on momentum. If shares are priced reasonably, then newsflow is likely to play a key role in moving share prices.”
He adds that plenty of shares are not overvalued, but have price momentum and earnings revisions. These are in sectors driven by improved corporate confidence; for example, travel, advertising, recruitment and technology.