The FE Alpha Manager points out that not only are US companies "reshoring" and bringing their operations back home, but foreign manufacturers are now bringing their operations to the US, hoping to benefit from reduced energy costs. "The oil shale boom should have many benefits," he said. "The Bank of America has forecast that US Gulf Coast imports of light crude oil will probably drop to zero by 2014."
"Light crude oil accounts for 15 per cent of the US total imports, compared with 20 per cent two years ago."
Thomas says the impact of this shift on the wider economy will be massive and UK investors can benefit through indirect exposure.
In his £3.6bn AXA Framlington UK Select Opportunities fund, Thomas says he has exposure to six of the top-10 most exposed UK quoted companies.
He says UK plant hire firm Ashtead, BBA Aviation, Shire Pharmaceuticals, oil field services firm Hunting, publisher Pearson and aerospace firm Meggitt are all set to gain from growth in the US.
"Even North America’s neighbour to the south, Mexico, is booming," he said.
"China’s hourly wage rates have fast converged with those of Mexico and from 2000, when they stood at an 80 per cent discount, are now only 20 per cent lower than Mexico."
"This is compensated by Mexico’s proximity to the US, with good logistics and a large available and young workforce among a population of 118 million."
"Throw in 39.9 million Facebook users, the fifth highest in the world after the US, Brazil, India and Indonesia, and 11.7 million Twitter users, also the fifth biggest user group in the world."
While he is positive on the energy boom in the US, Thomas says it is by no means limited to North America.
"The North Sea saw nine new fields – with total recoverable resources of 153 million barrels – come on stream in 2012, four times more than in 2011," he added.
The industry is continuing to invest in new fields and technology, which Thomas says will further benefit Hunting.
"Within the AXA Framlington UK Select Opportunities fund, oil companies Premier Oil, Ithaca/Valiant Petroleum and Serica all have significant exposure to the North Sea, not forgetting BG, BP and Royal Dutch Shell," he explained.
The five crown-rated AXA Framlington UK Select Opportunities fund is one of the best-performing portfolios in the IMA UK All Companies sector, delivering top-quartile returns over three, five and 10 years.
Over the last decade, the fund has nearly doubled the returns of the sector, gaining 273.19 per cent. The sector made 145.27 per cent.
Performance of fund vs sector over 10yrs
Source: FE Analytics
The fund’s defensive positioning means that it lags its peers over one year; however, the portfolio has consistently outperformed over every other calendar year in the last decade.
It had a particularly strong 2009 and 2010 when it bounced back from the 2008 financial crisis more strongly than other UK All Companies funds.
Year-on-year performance of fund vs sector
| Name | 2012 (%) | 2011 (%) | 2010 (%) | 2009 (%) | 2008 (%) | 2007 (%) | 2006 (%) | 2005 (%) | 2004 (%) | 2003 (%) |
|---|---|---|---|---|---|---|---|---|---|---|
| AXA Framlington UK Select Opps | 10.59 | -0.29 | 26.94 | 33.92 | -29.53 | 3.71 | 17.99 | 24.55 | 23.38 | 36.33 |
| IMA UK All Companies | 15.05 | -7.04 | 17.53 | 30.4 | -31.96 | 1.85 | 17.38 | 20.86 | 12.68 | 21.84 |
Source: FE Analytics
It is currently yielding 1.04 per cent.
In spite of large inflows in recent years, Thomas has maintained the fund’s multi-cap exposure, benefiting from opportunities across the market cap spectrum.
The fund’s largest holding is ITV, an investment Thomas says was "well timed" both in terms of the company’s recovery and that of the wider economy.
"A large special dividend at the end of the year boosted the total return from the stock," he said.
He adds that the fact the company has held onto its share of national advertising revenue is encouraging, and that it remains one of his highest-conviction bets in the portfolio.
The fund’s highest sector weighting is to industrials, with 30.54 per cent in the sector.
Among the portfolio’s largest holdings are HSBC, GlaxoSmithKline and UK-based mobile graphics and microprocessor chip technology firm Imagination Technologies.
The fund requires a minimum investment of £1,000 and has ongoing charges of 1.57 per cent.
