Table showing the most popular stocks in Unit Trust and OEIC portfolios
| Rank | Stock |
| 1 | BP |
| 2 | Vodafone |
| 3 | Royal Dutch Shell |
| 4 | HSBC |
| 5 | GlaxoSmithKline |
| 6 | BG Group |
| 7 | AstraZeneca |
| 8 | British American Tobacco |
| 9 | BHP Billiton |
| 10 | Nestle |
Source : Financial Express Analytics
The volatility in the financial markets has meant that many fund managers have been increasing their allocation in the defensive pharmaceuticals sector. One of the main beneficiaries has been the UK-based AstraZeneca.
Data from Financial Express Analytics suggests that choosing to hold AstraZeneca over the past year would have been an astute investment decision. When compared with the FTSE All Share, AstraZeneca has an R-squared value of 0.06 meaning that the stock’s movement is not correlated to that of the FTSE All Share. This is combined with the steady performance increases since March 2008 which means that this pharmaceutical company is a good choice for a portfolio when the markets are falling.
AstraZeneca has performed considerably better in the last year than rival GlaxoSmithKline, whose performance is more correlated to that of the FTSE All Share.
Performance of AstraZeneca and GlaxoSmithKline over the past year
Source: Financial Express AnalyticsFunds
Of the 303 funds holding AstraZeneca in their top-10, those with the greatest weighting allocated are:
| Fund | Weighting | Change (previous mth) |
| CF Amadeus |
13.28 | New entry |
| Santander Balanced Portfolio Growth |
8.81 | Up |
| SWIP UK Advantage |
7.58 | Up |
| Scottish Widows UK Select Growth |
7.4 | Down |
| SWIP UK Opportunities |
7.4 | Down |
| Baring Equity Income |
7.2 | Up |
| SVM UK 100 Select |
7 | Up |
| CF Walker Crips UK High Alpha |
7 | Same |
| Martin Currie UK Growth |
6.9 | Same |
| Aviva UK Income & Growth |
6.9 | Up |
Source: Financial Express Analytics
Peter Cockburn, fund manager of SWIP UK Advantage, is one of a number of managers choosing to increase their holding in AstraZeneca. He states that “our long term holding in AstraZeneca again performed well. The pharmaceutical group has been an outstanding performer over the course of 2008 with investors favouring companies with more defensive earnings characteristics”.
The performance of AstraZeneca gives weight to the argument for active stock-picking. In the case of this stock, its sector is a traditional haven in times of market volatility but as shown with the performance of GlaxoSmithKline, not all stocks within a sector yield the same results.
Outlook
Despite experiencing success over the last year, the outlook for the pharmaceutical sector is less than certain. The industry is coming under increasing external pressure which will reduce its profits.
The Government’s Pharmaceutical Price Regulation Scheme is set to enforce a 3.9 per cent cut in the cost of drugs sold to the NHS, with a further price cut of 1.9 per cent in January 2010. In addition, the introduction of generic substitution of branded drugs from January 2010 will severely hit the profits of the major pharmaceutical companies.
However, investment in the pharmaceutical sector remains is good choice for those wanting to guard their assets against the downside risk of the market as a whole. Even with reduced profits these companies will continue to be defensive stocks and as data from Financial Express Analytics shows, AstraZeneca is one of the brightest lights in the sector.