4 Funds Packed with Energy and Bank Stocks

These highly rated funds are propped full of stocks that benefit from the winning streak of energy and financial services

Sunniva Kolostyak 21 February, 2022 | 3:34PM
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When we recently looked at the top performing stocks of the year so far, we found that energy and financial services were doing particularly well. The top stocks under our coverage were Shell (SHEL) and Standard Chartered (STAN), both up above 25% in 2022, showing the resurgence of value companies after a lean few years.

So which funds have a high allocation to these sectors? These four are among the ones we like the best.

Jupiter UK Special Situations

The special situations fund from Jupiter has a value-biased UK equity strategy that Morningstar likes as the fund has an analyst rating of Gold. Its manager Ben Whitmore has been at the helm since 2006 and has proved he has a clear ability to select stocks in a disciplined fashion with a focus on long-term gains, our analysts say. The fund is up 4.72% this year and 6.34% annualised over three years.

Almost a third of its portfolio is focused on energy and financial services. Some 9.19% is accounted for by energy stocks, and BP (BP.), the second biggest holding, accounts for 5.31% alone. Financials account for 20.30% of the fund, and the biggest holdings within the sector are Aviva (AV.A) and Standard Chartered. The two account for 3.79% and 3.58% respectively.

Schroder Recovery

Another Gold-rated fund is Schroder’s recovery vehicle. Morningstar’s analyst Daniel Haydon describes the fund as “differentiated and deeply contrarian”, and one of the highest-conviction ideas for deep value in the UK equity market. Its managers aim to find firms trading at significant discounts to their fair values. So far this year, the fund is up 6.15%, while over three years, the fund has grown 6.49% year-on-year on an annualised basis.

The recovery fund is weighted 23.35% to financial services and 16.81% to energy – a significant overweight against category averages of 18.80% and 7.02%. The fund’s top four stocks are Barclays (BARC), Standard Chartered, Shell and BP with about 3.50% of the portfolio each.

Man GLG Undervalued Assets

The team behind the Man GLG Undervalued Assets has a strategy of conducting thorough analysis of companies’ balance sheets, which has earned every share class an analyst rating of Silver. The fund invests in two types of stock: those trading below the true value estimate, and those where the company's profit stream is being undervalued relative to the cost of capital. Its returns this year has not been as hot, however, at 1.84%. Over three years, the fund has grown 2.46% every year.

Man GLG’s undervalued assets fund has the largest allocation to the two sectors among the funds on our list. In total, financial services and energy account for almost half the fund, with 23.53% and 20.56% each. The fund holds 63 stocks in total, but Shell still accounts for almost 10% of the fund. BP, the second largest holding, takes up 5.59% of the portfolio.

J O Hambro Capital Management UK Equity Income

The Silver-rated JOHCM fund is managed by a team of veteran income investors who have worked together for two decades. The approach focuses on stocks with above-market dividend yield, as well as reasonable growth prospects. The strategy's success has seen it gather significant assets and has had multiple soft closures as a result. The measure is currently in place, but this is expected to lift soon. It has returned 4.03% so far this year, and on a three-year annualised basis, it has grown 7.35%. Over the past 12 months its dividend yield has been 3.94%.

The portfolio is almost one third (31.21%) financial services stocks, and Barclays, Aviva, Legal & General (LGEN) and Standard Chartered all make appearances in the top 10. That said, BP is the biggest stock in the portfolio. In total, energy accounts for 11.64%.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Sunniva Kolostyak  is data journalist for Morningstar.co.uk