Pharmaceutical giants AstraZeneca and GSK are the most-owned stocks among funds in the IA UK All Companies sector, with more than half of the peer group making the companies a top 10 position.
The UK market has been shrinking over the past few years due to a rise in mergers and acquisitions (M&A) combined with a lack of initial public offerings (IPOs). This could cause herding, with managers owning similar stocks as the pool of options reduces.
Earlier this month, Trustnet looked at the most-owned stocks among funds in the IA UK Equity Income sector. In that review, GSK took the top spot but here AstraZeneca is the more common selection.
AstraZeneca is the largest company in the UK, with a 9% weighting in the FTSE 100 and 8% in the wider FTSE All Share index. Its shares have been on a strong run, doubling over five years – twice as much as the two indices above.
Performance of stock vs indices over 5yrs
Source: FE Analytics
In a recent interview, FE fundinfo Alpha Manager Anthony Lynch explained how the stock is such a large part of the index that betting against it is a big risk.
“We don’t like AstraZeneca that much, but we also don’t want to take a huge bet against it. It’s expensive versus GSK, but AstraZeneca has an incredibly strong R&D track record and no obvious patent cliffs. It can surprise with a blockbuster, so for risk‑management reasons we keep that one nearer neutral,” he said.
The stock makes up a top-10 position in 120 funds in the 209-strong IA UK All Companies sector, or 57.4% of the peer group. This figure may be significantly higher, however, if accounting for funds where the stock appears outside the top 10.
Given its large index weighting, the funds with the highest allocation to the stock are broadly passives. L&G UK Equity UCITS ETF and iShares MSCI UK UCITS ETF have a 10% and 9.7% allocation respectively.
However, it is a top weighting in some active funds too, including Liontrust UK Growth (9.6%), Schroder UK Alpha Plus (9.5%) and CT UK Sustainable Equity (9.3%). In total, 11 funds have a position of more than 9% to the stock.
Source: Trustnet
In second place is its rival GSK, which is a top 10 position in 106 funds – or 50.7% of the sector. Despite being the eighth largest stock in the FTSE All Share index, it is the second-most popular among fund managers.
Unlike AstraZeneca, the funds with the largest weightings are active. CT UK Growth and Income, BNY Mellon UK Opportunities (Responsible) and FTF ClearBridge UK Rising Dividends all have more than 6% of their portfolios invested in the stock, more than double its index weighting. A further 13 names have a 5% or higher allocation.
It is slightly more popular among income funds, however, as it was a top-10 holding in 76.9% of funds in the IA UK Equity Income sector.
The two pharma giants are the only stocks where more than half of fund have taken a top 10 position, although oil major Shell is close at 45.5%. It was the more common choice ahead of BP (33%), although both are less owned among more general UK funds than their income peers.
Liontrust UK Growth has the largest weighting to Shell of any fund in the sector at 9.8%, while JOHCM UK Growth is the most bullish on BP, with a 6.2% position.
Over the year, BP shares are up 65.6% and Shell 43.4%, both rising more than 20% over the past three months as the oil price rallied following the war in Iran.
Despite being the second-largest stock in the UK, HSBC was the fourth-most owned among UK funds, with 94 (or 45%) taking a top 10 position in the banking group.
Of the 15 funds to take a position of 9% or higher in the stock (which makes up 7.6% of the FTSE All Share and 8.6% of the FTSE 100), the majority are passive funds.
Unilever is more popular among IA UK All Companies funds than the income peer group, with 93 (or 44.5%) taking a top 10 position in the stock.
Last month, it was announced that the consumer staples giant is in talks to sell its food brands (including brands such as Hellman’s mayonnaise) to McCormick, the owner of French’s Ketchup.
It sold its ice cream division last year, with Russ Mould, investment director at AJ Bell, noting that the presence of activist investor Nelson Peltz on the shareholder register since 2022 has “led to consistent pressure on Unilever’s management to streamline the business”.
Ninety One UK Special Situations has the largest stake in the stock at 8.4%, while it accounts for more than 5% of four other portfolios, including Artemis UK Select and JOHCM UK Dynamic.
Mining firm Rio Tinto was the only other company backed by more than a third of IA UK All Companies funds (34%), with banking groups Barclays and Lloyds both appearing in the top 10 holdings of around a quarter of the peer group.
Cigarette maker British American Tobacco, jet engine maker Rolls-Royce and software company Relx rounded out the table above.