Buy into a growing economy with benchmark-beating Artemis US Select

Against this good economic background, the US dollar has been strengthening against other currencies. And this looks likely to continue as the US Federal Reserve is committed to raising interest rates, a move that tends to boost a country’s currency.

“We are seeing a strong indication from the Federal Reserve that they would like to increase interest rates (which are currently at 2 per cent) both this year and into 2019,” says Ryan Hughes, head of active portfolios at AJ Bell. “It’s looking like at least two more interest rate rises this year and maybe three or four interest rate rises next year. That backdrop makes the US dollar attractive to both domestic and overseas investors and in theory that should underpin the US dollar and push it higher from here.”

US equities are likely to benefit in such an environment and a good way to get exposure to the asset class is Artemis US Select Fund (GB00BMMV5105). Its manager, Cormac Weldon, takes a flexible approach to picking stocks and changes focus as the economy and market changes, with the aim of delivering returns in different conditions. So as well as considering a company’s individual attributes he also pays attention to wider financial, market and economic risks.

Unlike many actively managed funds investing in the US, the fund has successfully beaten its benchmark, the S&P 500 index, and the Investment Association (IA) North America sector average, since its launch in September 2014. Over this period the fund made 107 per cent compared with 90 per cent for the index and 80 per cent for the sector. Mr Weldon's style is to take a relatively concentrated approach, investing in around 50 stocks, which tend to be mega- and large-cap growth stocks. The current top 10 holdings account for almost 40 per cent of the fund.

This style of investing has a much longer track record than the Artemis fund. Mr Weldon previously ran the Threadneedle American (GB00B7T2FK07) and Threadneedle American Select (GB00B7HJLD86) funds, the latter for over 12 years. In that time, Mr Weldon also beat the S&P 500 and the IA North America sector average, returning 84 per cent versus 64 per cent and 51 per cent.

Artemis US Select also has a very attractive risk/reward profile with a three-year Sharpe ratio of 1.66. The Sharpe ratio measures how much return a fund generates for the amount of risk it takes, and any figure above one is a good score. During the worst 18 months of the global financial crisis, Mr Weldon's losses were lower than that of the sector average, and the index.

A quarter of the fund’s assets are in information technology companies, while healthcare makes up the next largest sector, with 17 per cent. The fund has recently been adding to Abbott Laboratories (US:ABT), a global healthcare company, and Humana (US:HUM), a US-focused healthcare insurer.

While the outlook for the US stock market looks promising, there is no certainty it will continue to perform, as it could be the short-term positive impact of President Trump’s corporate tax cuts. There are also concerns on US equity valuations and suggestions the country could be entering the latter stages of the economic cycle. Meanwhile, given the notorious difficulty actively managed funds have in beating the US market, the fund may sometimes fail to beat the index.

But the fund’s experienced management and proven investment approach suggests it is well positioned to pick good stocks. So if you are looking for exposure to the US market, Artemis US Select has the potential to deliver strong returns with a good risk profile. Buy. EA  

Artemis US Select Fund (GB00BMMV5105)

Source: Morningstar as at 14/08/18, *Artemis Fund Managers as at 30/04/18

Performance

Source: FE Analytics as at 13/08/18

Top 10 holdings as at 31/07/18 (%)

Source: Artemis Fund Managers

Sector breakdown as at 31/07/18 (%)

Source: Artemis Fund Managers