Ninety One’s UK Franchise Fund portfolio manager Ben Needham talks to this news service about the impact of recent AI developments, and investment opportunities in the UK’s undervalued market.
The impact of recent AI developments has had a revolutionary
impact, creating investment opportunities on the UK’s
undervalued market, according to Ninety One‘s UK Franchise
Fund portfolio manager Ben Needham.
“The tech is revolutionary and it is game changing to a degree
for certain job styles and sectors,” Needham told this news
service in an interview. “It’s creating opportunities. If you
look at what happened with Anthrophic, an AI safety and research
company, they were launching new products. There was a big
sell off in anything that was software and data related. It’s
creating opportunities in that area of the stock market for
software like Sages. We also invest a lot in consumer staples.”
“With the UK, there is something for everyone which makes it
interesting. There is a broad array of old school sectors – oil
and gas and mining, banks and quality sectors like multinational
IT Relx, Experian, a data and tech firm, Sage in software,
autotrader and consumer staples like Unilever and Diageo,” he
continued. “That blend of hard assets and quality ones means that
the UK market is a vibrant and well-hedged market to invest in
capital to get exposure to a wide array of drivers. If AI is a
risk and affects software, we are quite hedged. We are enjoying
working with a lot of opportunities. We bought Intertech at the
end of last year and added to it in February and DCC – a
Dublin-based energy distributor – the price was too low and
we have a 5 per cent position in that.”
Despite UK politics and macroeconomics, Needham said he is a
bottoms up investor. “We buy them as we think they are better
than [the] competition. We look at firms like Wetherspoons that
can deal with the political instability, [the] same with Next and
Greggs, which are more UK domestic holdings,” he said. “We invest
in quality companies – a lot of the revenue exposure is coming
from outside the UK like Unilever which is a consumer staple. It
is very diversified and a bedrock of the portfolio. Unilever and
Diageo have had some of the lowest valuations for years. A
big chunk of our portfolio is vulnerable to private equity. We
think there are big opportunities in the UK with firms that are
typically better but undervalued. There are a lot of
opportunities to take advantage of,” Needham continued.
Although a number of investment managers have been investing in
emerging markets recently, because the UK has been partly left
behind, it has created a vibrant environment for
mispricing opportunities for active investors. “If you look at
quality investment since 2020, it has been left behind a bit, and
shares get cheap. We are there for quality – investment style. We
don’t think it can get worse as it’s been so bad. It is a
positive for the UK and quality investing in the UK. We are
seeing more M&A and buy-backs and cash returns increasing.”
“I think it’s a tricky environment but it creates opportunities,”
he added. On ESG, he said he works with a lot of firms to move
away from carbon-focused products. “We don’t invest in oil stocks
and our carbon footprint is quite low,” he said.
Matthew Spencer, head of UK retail at Orbis Investments,
also finds a lot of investment opportunities on the UK
market. “Firms are cheap and undervalued due to the negative
sentiment,” he said. See more
here.
UK Franchise Fund
Over at least five years, the fund has aimed to
provide capital growth and income. The fund invests primarily (at
least two-thirds and typically substantially more) in the shares
of UK companies (those incorporated in, domiciled in, or that
have significant economic exposure to, the UK), which are
believed to have quality characteristics typically associated
with strong brands, franchises or lasting competitive advantages.
The index used in the performance section is deemed to be a good
representation of the fund’s investable universe and is widely
used, independently calculated and readily available.
The fund is mainly invested in securities of UK companies.
However, due to globalisation, the investments are exposed to a
number of other countries. Top holdings include Diageo,
Unilever, RELX, Amadeus IT Group, the London Stock Exchange
Group, Haleon, DCC, Wise, Experian, British American Tobacco. Top
sectors include industrials, consumer staples, technology,
healthcare, financials, consumer discretionary, basic materials,
cash.