With the Black Friday phenomenon – a shopping discount frenzy embedded in the US Thanksgiving holiday – now experienced all over the globe, Willis Owen’s Adrian Lowcock (pictured) highlights three sectors that could be considered bargains. 
The Willis Owen personal investing head said that UK investors might want to take a closer look at the IA Japan, IA UK Smaller Companies and IA Asia ex Pacific sectors – three of the most unloved markets currently – for managers poised to take advantage of the discounted markets.
Performance of sectors over 5yrs
Source: FE Analytics
Below, Lowcock highlights six funds from the three sectors that investors might want to consider further.
IA Japan
Japan has been an unloved sector amongst many UK investors with long memories of having been burnt in the past. After the 1990s Japanese asset bubble burst, the economy experienced years of deflation and has only just started to turn around more recently.
Prime minister Shinzō Abe’s so-called Abenomics programme of reforms have started to turn around perceptions of Japan as an investment destination.
But it’s not always been an easy ride.
“The past 12 months has been mixed for Japan,” said Lowcock said, highlighting the impact of protectionist policies by the US and its protracted trade war with China.
This has put investors into a cautious stance when investing in Japan according to Lowcock, “but digging further into its economy suggests a better picture”.
Abenomics have included reforms targeted at corporate behaviour and more shareholder-friendly policies, which have helped deliver returns.
“Companies are doing more share buybacks and increasing their dividend payments,” he explained. “Such is the scale of this policy that dividend cover is now better than in the West.”
In the sector there are two funds that Lowcock backs, the £2bn Man GLG Japan Core Alpha and the £677.4m Baillie Gifford Japanese Income Growth.
Man GLG Japan Core Alpha fund managed by Stephen Harker, who uses a “rigorous, repeatable process” with a clear focus on value, a long-term investment horizon and benchmark-agnositc approach, said the fund picker.
“He looks for those companies that appear to be undervalued when compared with rivals,” Lowcock said.
Harker manages the four FE fundinfo Crown-rated fund alongside Neil Edwards, Jeff Atherton and Adrian Edwards. It has made a total return of 70.68 per cent over the past five years compared with a 41.6 per cent gain for the TSE Topix benchmark. It has an ongoing charges figures (OCF) of 0.90 per cent.
Performance of funds over 5yrs
Source: FE Analytics
Meanwhile, Matthre Brett and Karen See’s Baillie Gifford Japanese Income fund is a “is a sound option for core Japanese equity exposure”, according to Lowcock.
The Willis Owen personal investing head said the growth-focused managers use careful stock selection and consider industry trends and themes to build a portfolio.
The fund made 51.23 per cent since launch in July 2016, outperforming the IA Japan sector. It has an OCF of 0.62 per cent and has a yield of 2.19 per cent.
IA UK Smaller Companies
Closer to home, Lowcock said UK equities have become unloved because of the uncertainty cause by Brexit.
“The smaller companies sector in particular has lagged significantly in 2019 as investors avoided the more domestically focused companies, perceiving them as most vulnerable to a Brexit-induced UK recession,” said Lowcock. “However, although UK growth has been subdued amid a wider slowdown in the global economy, there are some fresh signs of strength in the UK economy.”
The two funds in the sector backed by Lowcock are the Aberforth UK Smaller Companies Trust and the Merian UK Smaller Companies fund.
The £1.2bn Aberforth UK Smaller Companies Trust has no individual manager and is instead run in a more ‘collegial’ style.
“The team is very well resourced,” Lowcock said. “and has a depth of small-cap expertise. The team look for undervalued companies, when most smaller companies funds look for growth.
“The managers have rigidly stuck to their approach and have not wavered from their process, even when hitting rocky periods of performance.”
Over five years the trust has made a 49.09 per cent return. The closed-ended fund is currently is currently trading at a discount to net asset value (NAV) of 3.8 per cent, is 1 per cent geared, a yield of 2.2 per cent and an ongoing charges of 0.79 per cent.
Performance of funds over 5yrs
Source: FE Analytics
Dan Nickols’ Merian UK Smaller Companies fund has one of the most highly regarded small and mid-cap management team in the sector, according to Willis Owen’s Lowcock.
It has a more flexible style approach holding growth, value, and recovery companies, although it has tended to show a growth bias.
Merian UK Smaller Companies has made returns of 88.76 per cent over the past five years, and has an OCF of 0.79 per cent.
IA Asia ex Japan
Lastly, Lowcock highlighted the IA Asia ex Japan sector as one of those that was currently unloved but could offer some interesting value opportunities.
“Performance has been fairly strong for Asian markets in 2019, but some of this is driven by specific regions such as China,” Lowcock said. “The asset class has had to contend with headwinds from trade wars and a strong US dollar, and until this year rising US interest rates.
“Now, with the cycle changing, the region is in line to benefit from interest rate cuts and improvements in the global outlook. These take time to filter through, but should materialise as we move into 2020.”
Here Lowcock liked the £720.8m First State Asia Focus and the £1bn Schroder Asian Alpha Plus funds.
The fund picker said Alpha Manager Martin Lau followed a longer-term approach to management on the First State Asia Focus fund, although remaining flexible enough to adapt to prevailing social and economic conditions.
“Martin Lau and his team apply a tried-and-tested company selection process, which looks for quality businesses that deliver sustainable growth at attractive valuations,” he said.
“Capital preservation is considered to be the foundation for long-term capital gains, so the fund is run looking for absolute return and with a balance between risk and return.”
The fund has returned 98.82 per cent over the past five years and has an OCF of 0.9 per cent.
Performance of funds over 5yrs
Source: FE Analytics
The four Crown-rated Schroder Asian Alpha Plus fund, meanwhile, is overseen by Matthew Dobbs described as an “excellent stockpicker” by Lowcock. Dobbs looks for companies with a focus on “visible earnings growth, sustainable returns, and at a reasonable price”, he said.
The portfolio is unconstrained meaning Dobbs can allocate “where his conviction is highest, rather than in consideration of the benchmark,” according to Lowcock.
The fund has made 103.34per cent over the past five years. It has an OCF of 0.95 per cent.