He commented that he is broadly keen on the UK consumer at present, believing that the current low interest rate environment, and the fact that wages are rising faster than inflation will mean that consumers continue to borrow and spend.
The fund manager takes the view that the negative impact of inflation on consumers is ‘overstated.’
Legget added that he expects UK economic growth to be higher than the market consensus estimate of 1.2 per cent this year, and to be nearer to 2 per cent than one per cent. The Bank of England currently forecasts 2 per cent GDP growth this year.
The fund manager is not keen on the shares of clothier Marks and Spencers’s commenting that the companies sales have been in decline for years, ‘when consumer spending was strong, and when it was weak.’
He believes that many retailers such as M&S will be usurped by technoloigical change.
In contrast he remains keen on the housebuilders as a sector, remarking that, ‘the ones we own are growing earnings, and dividends.’
The fund manager is particularly keen on Crest Nicholson. He said, ‘ Crest Nicholson reported a strong set of full-year results: it has sold more homes and prices have risen. It continues to generate strong cashflows, supporting a 40 per cent increase in its full-year dividend. Trading on a forecast dividend yield of over 6.5 per cent, we still believe that there is a lot of value both in Crest Nicholson and the broader sector.’
He is also keen on financial companies, particularly life insurance businesses.
Legget concluded his comments with a rundown of the shares he has been buying and selling over the past month.
The fund manager said, ‘ Following BT’s profit warning, we sold what remained of our small position. We had begun reducing the holding last year when it failed to reach an agreement with the regulator on the future of Openreach, its broadband subsidiary. The update highlighted that profits and cashflows from their corporate and global services divisions would be lower than expected, leaving cashflows more reliant on the fortunes of Openreach. Elsewhere, we added modestly to our holdings in Arrow Global (a purchaser and manager of debt) and Tyman (building products). Both stocks had drifted lower despite a lack of any real news. We funded these purchases by taking further profits in Vedanta.’
The Artemis UK Select fund has returned 76 per cent over the past five years.