Major UK companies are in rude health and acquisitive overseas companies will be licking their lips at some of the prospects.
That is the view of Richard Colwell, manager of the Threadneedle UK Growth and Income fund.
The fund holds a relatively concentrated number of companies, typically ranging from 35 to 50.
Mr Colwell said: “I’m a stock picker and this is a best-ideas fund. I look to invest in attractive businesses which are out of favour, but unlike some ‘special situations’ funds I tend to hunt more at the top end of the FTSE 250, or the bottom end of the FTSE 100 index.”
There is no specific income target for the fund but, because the manager is a “value investor”, it will typically yield at least as much as the overall UK stock market.
Investors will be familiar with all of the top 10 holdings in the fund which now includes Centrica.
Mr Colwell said: “It (Centrica) is attractive to us due to its strong balance sheet which underpins the dividend stream. It’s able to withstand the volatility in gas prices and is in a good position to help deliver the greener energy policies that are so important to the (UK) Government.”
The manager cites another holding in the fund, BT, as a classic example to the coalition government of what can be achieved in a relatively short period.
Mr Colwell said : “The company looked like a typical civil-service department a few years ago. Since then, it has new management and went through a lot of pain with a dividend cut, but now generates sufficient cash to secure a growing dividend stream as well as fund the pension deficit and still invest heavily in developing the fibre-optic to home market which also assists the government with its goal of expanding the broadband network around the UK.”
The fund has delivered a return of 24.6% over the 12 months to July 27 compared with a 22.4% return from the average fund in the UK All Companies sector.
For more information on the Threadneedle UK Growth and Income fund, visit www.threadneedle.com or call 0800 068 3000.
Barry O’Neill is a chartered financial planner with Thomson Shepherd and can be contacted on 01224 619215