US small-cap fund ups asset manager and industrial exposure

Lauren Romeo, manager of the Legg Mason US Smaller Companies fund, has increased the fund’s exposure to asset managers and industrials, citing lower valuations.

Eight new stocks were added to the £136m fund’s portfolio following the lower valuations that emerged from the market volatility of the third quarter.

Steel services provider AZZ Corporation and industrial components manufacturers Flowserve have both been added to the portfolio.

“Flowserve is an example of a stock that had been above $5 billion in market capitalisation but fell below that threshold during the recent market correction, making it eligible for us to purchase,” says Romeo.

“It has approximately 40% of its business in emerging markets and also generates 40% of its revenues from higher margin aftermarket sales which provides a recurring nature to its cash flows,” she adds.

Asset managers Lazard and Affiliated Managers Group have both also been added to the portfolio based on their “high margin, low capital intensity”.

Positions in the healthcare, mining, technology and consumer discretionary sectors have also been boosted.