UK a stockpickers’ market, says Hall

BWD Aggressive Growth fund manager Mark Hall has been moving his portfolio back towards mid and small-caps after a period favouring large holdings. Ahead of last year’s market recovery, Hall increased the blue-chip component of his £54.5m portfolio. The senior index accounted for 65% of all holdings by February 2003, but he is now moving back to seeking out individual stocks that can grow – which, he says, are found mostly in the mid and small-caps. Hall, who currently has only 30% of his portfolio in blue-chips, says: “The market is now back to about the right level and this environment favours pure stockpickers.” He adds: “Currently, the fund is very stock-driven. Most sectors of the market will have big winners and most will have major losers.” The fund manager has not found that any particular sectors offer more opportunities than others, and his picks are spread right across the market. His process involves finding stocks that have a “catalyst for change”. This could include a change in management, acquisitions or disposal of assets. These are two to three-year stories, but Hall says such positions need to be combined with a strategy of holding stocks that are likely to make profits over shorter time periods. Even if his choices were right, he says, it is uncertain the market would recognise that, and it may take some time for the positive news to be factored into share prices. Hall says: “If you are Anthony Bolton running Fidelity’s Special Situations fund, then if you don’t meet your predictions on a six-month view, you have a 20-year track record of getting it right. We cannot afford short periods where we get it wrong. “There are two key drivers to the portfolio – long-term core holdings and short-term opportunities where we are taking advantage of oversold positions, mainly in large-caps.” One stock that offers short-term gains is Vodafone, says Hall. It has had a weak run, alienating shareholders by showing an interest in the US auction for AT&T Wireless. Over the past year, the trust has outperformed its actively managed peers in the IMA UK All Companies sector. According to Trustnet, the portfolio rose 35.8%, while the sector went up 33.5% during the 12 months to February 5.