Felix Wintle, manager of Neptune's US Opportunities Fund, is convinced that the US will lead the world out of the global recession. And he is adamant that Uncle Sam will emerge long before the UK and Europe manage to pull themselves out of the doldrums.
His reasons for buying into the 'first in, first out' argument are manifold: "First off, it's a much bigger economy with much greater exposure to emerging markets. The US is one of the best ways to play emerging markets given American companies' domination globally. You name a global growth sector - be it oil and gas, agriculture, technology or healthcare - and you will find US companies dominating that sector."
Mr Wintle also believes the fact that the Fed cut rates almost 10 months ahead of the Bank of England and the European Central Bank will help the US economy to recover and rebound much quicker that its Western world counterparts.
The final reason for his optimism is "the US has a government willing to do what it takes to get the economy back on its feet". And here, Mr Wintle sings the praises of President Barack Obama. "The Obama effect is felt by everyone and while one should be cautious about putting all your hope into a politician - Obama is someone who inspires the world."
Aside from the feel good factor of Obama and the simple fact "that he is not Bush", Mr Wintle believes the new president has done a few things right since being elected to office.
"While the Bush regime was all about 'China bashing' - blaming everything on the Chinese, Obama made a 180 degree turn by going to China very soon after his inauguration. He has been much more conciliatory to the Chinese, and other nations that have been ostracised by Bush's almost xenophobic regime.
"Obama has done a lot to reduce the geopolitical risk premium."
While clearly an admirer, Mr Wintle isn't simply jumping on to the Obama bandwagon. While the world was still debating the likelihood of America electing its first black president, Mr Wintle was positioning his fund's portfolio to benefit from an Obama win. "Prior to the November presidential election we started to put money back into the market. We were quite encouraged by the stimulus package Obama was promising and bought into industrial stocks, energy stocks and materials as strong infrastructure plays." Thanks to its positioning, the fund enjoyed a sterling fourth-quarter rally on the back of Obama's win.
| Felix Wintle CV |
|---|
| Felix Wintle joined Neptune Investment Management in January 2004 from City Financial Asset Management. He is head of US Equities, and also manages the Neptune Latin America Fund. In May 2008, he was appointed to the position of investment director. His global sector focus within Neptune is healthcare and biotechnology. After graduating from Durham University in 1997, Mr Wintle joined City Financial in 1999 as an investment assistant and became a fund manager in September 2003. |
This type of macro economic positioning is part and parcel of Neptune's top-down approach to making investments. Mr Wintle points to the (very) long table in the company's boardroom, featuring 20-plus seats, as the place where the entire investment team meet and discuss how they expect macro-economic indicators to feed through to the markets. "It's very much a team-based philosophy. We look at the macro view first, then sectors and then stocks. This approach has helped us to successfully identify turning points in the market."
Entering the first quarter of 2009, the Obama rally dissipated and Mr Wintle started to look for market tops and bottoms in order to identify super bearish areas where he could feed some money back into the market. "We noticed in Q1 that China had started buying more commodities again - in January the country had record imports of iron ore - more than the best times of 2007. This was particularly interesting at a time when everyone was bearish and fearing deflation and it indicated to us that the global growth story was alive - the patient had twitched."
Consequently, Mr Wintle started putting more money into the markets in late February and early March. "We made two good calls in Q1 - the first was reducing our cash position from 20 per cent to 8 per cent on 9 March, which turned out to be the day the market bottomed."
The second spot-on call was moving into financials - Mr Wintle upped his exposure to two US banks, CitiGroup and Bank of America, and reaped the rewards when the stocks went to the races.
The fund, which is 60 per cent core holdings and 40 per cent trading ideas, is now out of both stocks. While Mr Wintle believes such short-term plays are vital in these markets, some might call it risky play. But he begs to differ, saying that his short term plays have paid off and this is reflected in the fact that the fund is one of only two US funds which managed to deliver absolute positive performance in the first quarter of this year. "I do not see these banking trades as risky considering the beaten up state of the sector. What I do see as risky is fund managers stock picking without any regard to sector, given that so much of what is happening today is sectoral rather than company specific."
Another area of concern for investors might be the currency risk attached to a US fund. Mr Wintle concurs and says that one of the key correlations he has picked up managing the fund has been weak dollar - strong stock market. "As life is breathed into the market, the dollar goes weak and vice versa. So where does this leave UK investors? While we can, we have never hedged the dollar in the fund as we find it a better policy to invest in sectors that benefit from a weak dollar. Those sectors tend to be commodity related and the equity upside in these stock prices more than compensates for the dollar devaluation."
Mr Wintle believes that going forward macro economic factors will only play a greater role in the world's markets and says a top down approach will ultimately benefit. "Simply picking what you deem as the best stock is risky because of the value trap - it looks cheap when in fact it isn't. If you ignore the sector in which a particular stock is in, you can quite often miss the reason why the stock is not being re-rated higher."
