The managers of the Smith & Williamson North American Trust are taking a bet on Hollywood with a 2 per cent overweight position in US film and media stocks.
Robert Royle, who manages the £85m fund with Lady Tana Focke, is bullish on the outlook for the movie business.
The duo remain optimistic on the US recovery overall, in light of the improvement they have seen in consumer sentiment indicators, where confidence is at a five-year high. Royle says: “US markets are quite high and the US is more stable in general.”
The pair say valuations in the holdings remain a key focus and the trust has taken its profits in some top names such as Dean Foods, Cisco and DreamWorks. They have also sold off a number of holdings including film group Lionsgate, which jumped to an all time high due to strong earnings.
The Smith & Williamson North America Trust currently runs about 5 per cent in cash.
Lionsgate has produced films such as Twilight, The Hunger Games and the upcoming Divergent.
Royle says: “People have been very excited about the group and it has pushed the valuations up, and that is normally the reason to sell.”
Key stock plays for the managers currently include Walt Disney, Charter Communications and DreamWorks.
Royle explains US players are keen to build up positions in the UK or the US. Previously when firms such as DreamWorks made a film, only BBC and Sky in the UK bid for the first showing rights.
“Now when a film is brought to the UK there is BBC, Sky, as well as NetFlix and LoveFilm. All of a sudden you have gone from two bidders to four bidders.”
He adds: “DreamWorks is one of the few pure play content companies and so was Lionsgate. We sold the latter as it got too expensive and it has continued to be higher.”
Recently DreamWorks announced a new deal with NetFlicks which is promising. And in the past two months he says DreamWorks has gone up 30 per cent.
In regards to Walt Disney, he explains it owns US cable channel ESPN, with 65 per cent of its earnings coming from ESPN.
Other new additions in the Smith & Williamson North American Trust include Cullen and Frost Bank.