Following the relaxation of the pension system, shares in annuity providers and insurance firms such as L&G, Resolution and Phoenix Group plummeted.
Bookmakers such as Ladbrokes and William Hill also sold off significantly as a result of a tax increase on fixed-odd betting terminals.
However, there are a number of companies and sectors that stand to benefit from the Budget. Fidelity’s James Griffin and FE Alpha Manager Alex Wright highlight three stocks they own that they think fall into this category.
Rank Group
Wright (pictured) holds Rank, the FTSE 250-listed gambling and leisure stock, in both his Fidelity Special Situations fund and Fidelity Special Values Investment Trust.
He says it will be one of the major beneficiaries of the Government's plan to halve the rate of duty on bingo.“Rank operates casinos, online gambling and, most pertinently, bingo halls under the Mecca brand,” Wright said.
“One of the announcements in the Budget was that bingo tax will decrease to 10 per cent, to bring it in line with sports betting and online gambling. This will help offset the structural decline we have seen in UK bingo halls over the last few years and will result in a meaningful pick-up in earnings.”
“The company demonstrated its improved outlook for the space by announcing plans for three new bingo halls shortly after Osborne’s announcement.”
As well as running 98 Mecca bingo halls, the group also owns 35 casinos in the UK under the name Grosvenor Casinos and the online gaming and betting website Rank Interactive.
According to FE Analytics, shares in Rank had vastly underperformed the market over the last year, though the stock spiked 6 per cent yesterday following the Government’s Budget changes.
Performance of stock vs index over 1yr
Source: FE Analytics
Although the stock has bounced recently, our data shows that no funds in the IMA universe count it as a top-10 holding.
Brewin Dolphin
Wright is also a fan of Brewin Dolphin and holds it in his five crown-rated, but now soft-closed, Fidelity UK Smaller Companies fund.
The manager says that the company, which is one of the UK’s largest investment management and financial planning groups, will see growth due to the changes towards ISA allowances and the added flexibility for pensions.
“The Budget is also positive for wealth managers as it encourages saving and means pensioners will need more help managing their assets in retirement,” Wright explained.
“We were positive on the space already as industry dynamics are improving thanks to consolidation, IFAs leaving the sector and regulation which pushed up fixed costs for the industry, giving a further advantage to larger wealth managers.”
The manager added: “A key position is Brewin Dolphin, which also benefits from internal change as a new management team focuses on cutting costs and raising margins closer to those of its peers.”
Following losses of 11 per cent in 2011, shares in Brewin Dolphin have bounced back strongly due to changes within its business model and its exposure to the UK’s economic recovery.
Our data shows that investors who bought the stock two years ago would currently be sitting on a return of 115 per cent, and Wright says that performance is likely to continue.
Performance of stock vs index over 2yrs
Source: FE Analytics
Brewin Dolphin is a more popular stock than Rank with fund managers.
Apart from Wright’s UK Smaller Companies fund, there are seven portfolios that count it as a top-10 holding, including the top performing PFS Chelverton UK Equity Income and Unicorn UK Income funds.
Taylor Wimpey
Taylor Wimpey, among other housebuilders, is set to benefit from continuation of the Government’s Help to Buy scheme, according to James Griffin, who holds the company in his Fidelity MoneyBuilder Growth fund.
“A few days before the Budget, George Osborne announced that the equity loan scheme for new-build homes (Help to Buy 1) will be extended until 2020 and increased the levels of Government funding from £3.5bn to £6bn and from 73,000 to 120,000 homes.”
“This announcement is a big positive for the UK housebuilders as it materially reduces a key medium-term concern for them, and takes away market fears that some of the Government support may be withdrawn after elections.”
UK housebuilders have already had a strong run recently, with investors buying up the sector due to the Help to Buy scheme and the recovery in the housing market.
Our data shows that the likes of Persimmon, Berkeley Group and Barratt Developments have all returned more than 37 per cent over 12 months – with the latter making close to 80 per cent.
Performance of stocks vs index over 1yr
Source: FE Analytics
Given where valuations have reached with some of the names in the sector, the manager says that Taylor Wimpey – which has also returned 40 per cent over one year – is the best stock to play the theme as it is cheap on a relative basis.
“My preferred stock in the sector is Taylor Wimpey,” Griffin said. “Although it has performed well over the last 12 months or so, it has lagged its peers and trades on an attractive valuation of 1.5 times book value.”
“It has a sensible strategy focused on margin improvement over volume growth and continues to take advantage of attractive prices to strengthen its strategic land bank.”
The stock is listed on the FTSE 250. Eight funds, including Barclays Lower Cap and Henderson UK Smaller Companies, count it as a top-10 holding.
