Nigel Thomas buys media stocks and sups more liquid gas

Veteran UK fund manager Nigel Thomas explains why he has bought into ITV (ITV.L) and advertising giant WPP (WPP.L) and added to his positions in Shell (RDSa.L), BG Group (BG.L), Premier Oil (PMO.L) and Pearson (PSON.L).

Lapping up LNG

AXA Framlington UK Select Opportunities veteran Nigel Thomas has increased his liquid natural gas (LNG) exposure on a view that the fuel source will see long-term increased demand as interest in nuclear power wanes.

Thomas added to the theme through his top 10 fund positions in global LNG producers Shell and BG Group during April. The pair comprised 3.5% and 3.1% respectively of the fund on 28 April.

His third biggest holding, Premier Oil, is also a net beneficiary of the increased demand for LNG, representing 3.8% of the fund at the end of April. Thomas said the stock had a 20-year take and pay gas contract to supply Singapore, linked to the price of oil. Currently, Premier is receiving almost $19 per million cubic feet (mcf) compared to gas prices in the US which are nearer to $4 per mcf.

Thomas, who is sticking with his underweight position in mining stocks, told investors that in the aftermath of the Japanese earthquake and tsunami, 'the global attitude to nuclear power had changed' while LNG demand was likely to increase further.

No commodity bubble

He also expressed confidence that fears of a commodities bubble would ease as the US government was likely to wind up its programme of stimulating the US economy by through the buy-back government bonds. This process of 'quantitative easing' increased the amount of dollars circulating in the US and overseas. Much of this spare money found its way into emerging markets and commodities, driving up asset prices to record highs, until the recent sell-off.

Thomas felt that the blowing off of some of the froth in commodities spelled good news for retailers which have struggled with rising prices.

He said: 'In the fund we are underweight mining stocks and it is interesting to observe some rotation back into stocks whose rising input prices have been an issue, ie Unilever, Diageo and, for retailers, (cotton prices) ie. Marks & Spencer, Dunelm and Next, all of which we own.'

Media Boost

Thomas has also increased his media exposure due to long-term structural changes in the sector, as more and more media transitions away from traditional media, such as TV, towards the internet.

Citing US president Obama's decision to conduct a live broadcast on Facebook last month, rather than through televison channels, he said: 'There is a significant change in the balance of power between some traditional and new media.'