Parsons recommends BlackRock UK Special Situations
The Share Centre’s head of investment research highlights FE Alpha Manager Richard Plackett’s £1.4bn vehicle as one that successfully applies the contrarian approach.
By the very nature of its title, investors need to appreciate that BlackRock UK Special Situations
will generally hold companies that either have recovery prospects
or that are perceived to be undervalued relative to their growth potential.
The portfolio is reasonably concentrated, holding around 60 companies. Selections are based on stocks
that manager Richard Plackett
believes are undervalued relative to their cash position or that are in a recovery situation where there is conviction and belief in the management.
Unlike many other UK Special Situations funds, this one will broadly hold around 40 per cent in FTSE 100 companies, with the remaining 60 per cent in small to mid cap stocks, with the caveat that at least 50 per cent will always be in the latter.
Plackett looks to identify those high quality stocks with sustainable growth potential, good management, strong balance sheets, a proven long-term track record, and that are cash generative.
It is companies such as these that he believes are better equipped to deal with the current volatile environment.
As the UK economy remains tough,
believes the best opportunities are likely to come from companies with international exposure, especially to emerging markets.
Top holdings within the current portfolio include Spirax-Sarco, HSBC, Royal Dutch Shell, AVEVA Group and Vodafone.
Performance of fund vs sector and index since June 2004
Source: FE Analytics
According to FE data, the fund has returned 131.75 per cent since Plackett took charge back in June 2004, compared with 66.85 per cent from its IMA UK All Companies sector average and benchmark.
Only three UK All Companies funds have returned more, and all of these are mid cap-focused. BlackRock UK Special Situations
is also a top-quartile performer over three and five years.
It has a minimum investment of £500 and a total expense ratio (TER) of 1.67 per cent.