Tim Steer, the manager of the £301m Artemis UK Growth fund, has listed several domestic stocks he could short after the portfolio gained permission to use the technique.
Steer successfully shorted British-facing stock Connaught earlier this year as the environmental services firm headed into insolvency.
As an example of a company with a below-average outlook, Steer names Southern Cross Healthcare, which could lose revenue as a result of waning government spending. However, he declined to say specifically which stocks he would short. (article continues below)
Artemis had named Robert Wiseman Dairies as Steer’s first short, but Steer has since said he will not short its shares, describing the original statement as “an accident”.
Although the fund invests purely in British stocks, three-quarters of its earnings are derived from overseas, leading Steer to nickname it the Artemis Global Growth fund.
Steer has been trying to avoid businesses tied to Britain as the country’s growth outlook is worse than for most leading economies, although a small proportion of the fund’s earnings are derived from the ailing eurozone. To help him pick stocks on a bottom-up level he uses a quant screen called Market, which reveals an unusually high proportion of overseas earners in its top 30.
However, he has not completely shunned stocks with strong domestic earnings, buying into Babcock International and Majestic Wine.
The manager says the fund will not become a closet 130/30 vehicle because he restricts it to short positions of no more than 10%, with net long exposures of roughly 100%.
When he took over a little more than a year ago Steer avoided overweighting sectors of the index until he revised the portfolio. He has since gone overweight industrials, partly as a result of his overweight position in mid-cap growth stocks, where industrials form a major weighting.
At the end of August his industrials weighting was 23.4%, according to Trustnet. The top contributors to the fund’s performance include Abcam, Aggreko, Croda, Rotork and VT Group.
Steer’s stance on BP has assisted the fund against the index. He sold the stock soon after the Gulf of Mexico crisis began but brought it back into his top 10 on a cheap valuation.