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Threadneedle UK Equity Income
Citywire AAA-rated Richard Colwell believes the UK’s ongoing quantitative easing (QE) programme could be masking the fact the country may not have yet reached a peak in terms of bad debt.
He told Citywire Selection: ‘QE is no solution in itself but [the policymakers] are just trying to buy time. The major threat to the UK is sustainability of fiscal policies and we may not have reached the peaks of bad debts that are hiding behind QE.’
Colwell and A-rated Leigh Harrison have missed out on the rally in banks since last summer as they continue to avoid the sector. Colwell says banks still have ‘a long way to go’ before he can value them at their correct price to book levels.
Instead, the pair have upped exposure to core holdings in pharmaceutical giants GlaxoSmithKline and AstraZeneca.
Resilient stocks the engine room
‘The engine room of our investments is choosing more resilient corporates that generate internal cash and can better deal with economic shocks,’ says Colwell.
‘The new chief executive of AstraZeneca has said how he wants to get more out of their current pipeline, which has been well received by the market. [Astra’s] cashflow is resilient and they are getting more confident, especially with a new lead product.’
Colwell describes core holdings Unilever and Legal & General as the ‘bread and butter’ of the portfolio.
‘Legal & General had issues but has now delivered in terms of dividends. It had a rerating and has [seen] continued dividend growth. We are happy with this stock as it keeps on giving.’
The pair recently reduced their position in British American Tobacco and recycled the proceeds into Unilever.
‘BAT provides a good income and we did have a larger holding 15 months ago but Unilever is capable of producing more income for us.’
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- GlaxoSmithKline PLC (GSK)
- AstraZeneca PLC (AZN)
- Royal Dutch Shell Plc (RDSa.L)
- BP PLC (BP.L)
- Gkn PLC (GKN.L)
- Morgan Crucible Co Plc(The) (MGCR.L)
- IMI PLC (IMI.L)
- Wolseley Plc (WOS.L)
- Electrocomponents PLC (ECM.L)
- Cobham PLC (COB.L)
- Marks And Spencer Group PLC (MKS.L)
- Centrica PLC (CNA.L)
- Itv PLC (ITV.L)
- BG Group PLC (BG.L)
- Unilever PLC (ULVR.L)
- BT Group PLC (BT.L)
- Imperial Tobacco Group PLC (IMT.L)
- Johnson Matthey PLC (JMAT.L)
- Rolls-Royce Holding PLC (RR.L)
- BAE Systems plc (BAES.L)
- Derwent London PLC (DLN.L)
- National Grid PLC (NG.L)
- Pennon Group PLC (PNN.L)
- British American Tobacco PLC (BATS.L)
- WS Atkins PLC (ATKW.L)
- Legal & General Group PLC (LGEN.L)
- Compass Group PLC (CPG.L)
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