Which Trades Are Top Funds Making?

In a new series, we look at what Morningstar Gold-rated funds have been buying and selling

Sunniva Kolostyak 24 March, 2023 | 10:00AM
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Lacking stock ideas? With markets currently on another rollercoaster, making any solid bets feels like an extreme sport. So to guide us through the chaos, we have looked to at how our highest rated fund managers are laying down the cash.

Starting next month, we will be taking quarterly looks at what the biggest funds in the UK are investing in – so do check in then to read our new series.

For this article, we’ve looked at the Morningstar-rated stocks bought and sold by funds with our highest Analyst Rating of Gold. This way, we get to peek into the actions of our favourite managers to see what they think are worth trading at the moment.

Purchases and Additions

Let’s start with what the funds managers have bought: 12 of these stocks were added to the portfolio for the first time, while an additional five stocks were added to. That said, all the stocks bought over the past three months are different – there are no overlaps.

Fidelity Global Special Situations was the most active buyer and seller over the three-month period, buying four new stocks, which are all undervalued according to Morningstar analysis: SSE (SSE), Mercedes-Benz (MBG), Arkema (AKE) and Stellantis (STLA). The fund also added to two previous holdings; the slightly overvalued Oracle (ORCL) and fairly valued Compagnie Financiere Richemont (CFR).

Meanwhile, its UK Special Situations fund added to its Roche (RO) holdings and bought Reckitt Benckiser (RKT) and Direct Line (DLG) which are trading at a 10% and 44% discount respectively. Direct Line even appeared in last week’s list of UK stocks in the bargain bin as the share price has been affected by this year’s profit warning and dividend cut, and CEO exit.

A Comeback for Delivery Stocks?

Dimensional UK Core Equity added 5-star Deliveroo (ROO), which also appeared in our bargain bin article, to its portfolio. The company’s share price has been on a downward path ever since its now infamous 2021 IPO. However, the company delivered promising results last week, showing signs of (slow) growth and a path to profitability.

Deliveroo is the only rated delivery company in our list today, but delivered food might be looking appetising to investors again. Barings Europe Select Trust has in the past months decided to add delivery meal kit company HelloFresh (HFG) to its portfolio, a stock which posted profits below expectations earlier this month. Are we about to see a resurgence in delivery and online offerings?

Out with the Old

On the other end, a fair few stocks have been discarded. The biggest selloff was completed by Barings Europe Select Trust – it ditched chocolatier Barry Callebaut (BARN), a 5-star stock which previously accounted for 1.3% of the portfolio. Meanwhile, again, Fidelity Global Special Situations had the biggest clean-up and got rid of five stocks in total. One of these were Fidelity National Information Services (FIS) (not to be confused with fund house Fidelity), which is the only stock two funds sold out of, the other being JPM US Equity Income.

One stock appears in both the buy and sell tables: Scottish utility SSE. While Fidelity Global Special Situations added almost 2 million shares (now 1.8% of the portfolio), Dimensional UK Core Equity trimmed its exposure. The fund sold off 88,376 shares, reducing the weighting by 64% down to 0.5 percentage points.

For or Against Oil?

Oil stocks provide another contradiction in the dataset. BP (BP.) and Shell (SHEL) are both fairly valued with 3 stars after a very strong run in 2022. BP was the stock that appeared attractive to one investor (Dimensional UK Core Equity), who decided to increase its holding by 65%. The stock now makes up 2% of the entire fund.

But at the other end we find Fidelity Special Situations, who decided to cut 70% of its exposure to Shell, reducing holdings down to 0.7% of the entire fund.

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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

Sunniva Kolostyak  is data journalist for Morningstar.co.uk

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