James Griffin, portfolio manager of Fidelity MoneyBuilder Growth fund (GB0003863353), thinks large-cap stocks have significantly underperformed their mid-cap peers over a multi-year period and are now trading at a significant valuation discount. This means now could be the time to pick up some of Britain's long-term winners. He likes industry leading companies with strong balance sheets and diversified end markets, believing that they can prosper even with global growth likely to remain lacklustre for the foreseeable future.
"The long-term earnings and dividend growth prospects of industry winners should be an attractive home for investors' money," he says. "In the UK, we are fortunate that so many of the world's global winners are listed here. Such companies are able to fund themselves and can drive growth through marketing and research. Strong brands give them pricing power and the ability to pass on the impacts of rising input costs."
These companies include FTSE 100-listed advertising company WPP (WPP), a top 10 holding for Fidelity MoneyBuilder Growth, accounting for 3.95 per cent of its portfolio.
"WPP benefits from having significant exposure to both digital media and emerging markets, the key growth areas for the industry," says Mr Griffin. "Digital was originally seen as a threat for advertisers, but is now seen as a huge opportunity as companies need help in developing their online strategies. Within emerging markets, WPP has an unassailable lead in China given significant investment and first-mover advantage. The company is more conservatively managed than in the past, with a flexible cost base and strong balance sheet. It pays a good dividend which is well covered and expected to grow."
Investors Chronicle rates WPP a 'hold' because, while progress is decent in developing markets and digital media, with good dividend growth, the shares have risen a third since October and trade on 13 times forecast earnings. Read more on this.
