Artemis’ Steer puts ‘more emphasis’ on UK domestic stocks

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Artemis fund manager Tim Steer has added to UK-centric stocks to create more of a balance away from his previous bias towards UK equities with international exposure.

The £536m Artemis UK Growth fund had been concentrated on UK equities with a significant overseas business for almost a year and a half, according to Steer.

However the manager has recently been placing “more emphasis” on stocks with UK exposure.

He says: “About a year and a half ago, the fund was basically full of UK equities but with lots of overseas exposure.

“Now it is much more balanced. I wouldn’t say I have changed the focus to the UK but there is much more emphasis on UK-centric stocks than there was in the past.”

The fund’s top 10 holdings currently features stocks with significant UK exposure including ITV, easyJet, Howden Joinery, William Hill and the Daily Mail. 

Steer attributes this recent move to improvements in the wider UK economy as well as indications that UK-focused stocks are in “good shape” and can even outperform their international equivalents. 

He notes that UK household income is expected to grow by around 3 to 4 per cent between 2014 and 15, sparking increased consumer spending that will directly benefit companies such as easyJet and Sports Direct.

There are also signs that UK-centric companies will often outperform when compared with global stocks in a similar sector or industry, such as Apple and Renishaw or Phillip Morris and BAT.

As an example, Steer compares 20 random global mega cap companies and their UK equivalents between May 2008 and 13, revealing that UK-focused companies achieved a five-year annualised return of 21.5 per cent while their global counterparts returned around 11 per cent.

He says: “Everyone wants to own these global stocks, but there are UK equivalents that are riding the same themes and trends.

“What we are trying to do to a certain extent is look for these global themes and trends and then find UK ways of playing them.”

Steer also points improvements coming from within UK-facing companies including, easyJet, ITV and Howden. He says: “Companies are in very good shape, they are stronger now than they were five years ago and have got lots of cash. So we are looking at cash returns.”