Fund of the week: Export is a stable base for stocks

Nov 13, 2009

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The world is facing a "two stage" recovery, says Richard Plackett, manager of BlackRock UK Special Situations Fund. As such, he is cautiously optimistic about the year ahead, thanks to the opportunities emerging markets can offer, while Britain and America are stuck in boggy ground.

Last year was "very challenging" – his fund lost 29.8% of its value during 2008. But it could have been much worse; many funds lost far more. Plackett's lack of exposure to British banks, and preference for strong balance sheets, softened the blow.

Year to date, his fund is 7.6% ahead of the FTSE All Share index and Plackett remains confident in his investment strategy as small and mid caps, which comprise 75% of the fund, continue to rally.

Plackett looks at three things before buying a company.  Firstly, he likes an experienced management team, "who we have met and interviewed." Strong sales skills and strategic vision are paramount. And if they've invested in their own business it's a real sign of confidence.

Secondly, he looks at market position – does a firm have a unique product range, strong brand or specialised workforce?

Lastly, he considers company momentum. The point with small and mid caps is that you "want to see them keep cash and reinvest it".  So he looks for a strong order book, a healthy balance sheet, and focuses on the cash being generated, and what it is being used for.

At the moment he likes software firm Aveva, with its strong exports to emerging markets, notably China. He also tips Bath-based valve-maker Rotork – an export-based group with 90% of revenues coming from abroad. Rotork also boasts a strong balance sheet.

Contact: 0800-445522.

BlackRock UK Special Situations Fund top ten holdings

Name of holding% of assets
HSBC Holdings 5.5
AVEVA Group 4.4
Rotork 3.6
BP 3.0
Connaught 3.0
Victrex 2.9
Whitbread 2.9
Spirax-Sarco Engineering 2.8
Wood Group (John) 2.7
Ultra Electronics Holdings 2.5

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