The Analyst: Be aggressive now and profit in future

I really can't remember such a long period of unremitting gloom for the finance sections of newspapers and radio or television programmes.

Global markets have got off to their worst start for any year, just about ever. Banks in the United States are continually writing off vast amounts of money, the UK housing market is starting to fall and to top it all off, a rogue trader has lost a king's ransom for one of France's flagship banks.

You might think it is logical not to invest any money at all right now, but these are the times when investors can sow the seeds for future profits. This is what Ed Burke, the manager of the Invesco Perpetual UK Aggressive Fund, has been doing.

Mr Burke says that market sentiment is worse now than he can remember for a very long time. He agrees that the overall picture isn't especially good, but crucially he is finding compelling value in individual companies when the FTSE 100 index falls back below the 6,000 level.

The Invesco Perpetual UK Aggressive Fund is set up for a short, sharp recession, so if you don't believe that's what will happen then this clearly isn't the fund for you. However, if it does happen, then I would expect to see this fund at the top of the performance tables.

Ed Burke's long-term record speaks for itself; he has often been the person to buy when markets have hit the skids. He runs an aggressive portfolio where the largest 10 stock positions sometimes account for over 50 per cent of the fund.

This strategy relies on his stock-picking ability for success, and in this regard he has proved himself exceptionally able. Since the fund was launched in July 2001, it is ranked first out of 216 funds in the highly competitive UK All Companies sector – the fund has risen by 131 per cent during that time, compared to a gain of just 37 per cent for the sector average.

Mr Burke admits that the last year has been rather more difficult. He has moved the fund up the capitalisation scale into the large companies of the FTSE 100, which is where he is finding the best bargains. The market falls of recent months have prompted him to move aggressively into the most beaten-up areas, such as financial companies and housebuilders.

His move into housebuilders such as Persimmon and Bellway might appear odd given the outlook for the housing market in the UK. However, Mr Burke points out that these two companies have strong balance sheets with long land banks. This means that they don't necessarily have to buy land every year, and if they stopped buying land for just one year, it would save them some £500m.

On banks – and unlike his colleague Neil Woodford – Mr Burke feels that the exposure of UK banks to the sub-prime problems is not as bad as the market fears. He has bought into Bradford & Bingley, the share price of which has suffered due to the fallout at Northern Rock. However, Mr Burke is convinced that Bradford & Bingley is far more robustly financed and has a much more varied business than Northern Rock. It recently raised more than £6bn of cash and is one of the most liquid banks in the UK. Despite this, hedge funds are still betting that the share price will fall; if they change their minds and unwind these positions, Bradford & Bingley shares could move back upwards abruptly.

All things considered, Mr Burke believes that UK companies are in far better shape now than during previous economic slowdowns. For example, British Airways' debt is very low (£250m) compared to where it was in the 1991 recession (£4.5bn).

I always like to ask a fund manager about shares that have performed poorly for them – sometimes spectacularly so. Some managers squirm in their seats and try to change the subject, but Ed Burke is a different breed. He was forthright in admitting the mistakes he made in buying Northern Rock last year when its share price was around 700p. I like the fact that he quickly realised that had been a bad move and sold his holding at about 500p – I'm sure that lesser managers would have stubbornly held on and watched the price plummet down to the bottom at 63p. Choosing when to sell is probably a more important decision for a fund manager than when to buy.



Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independent

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Sport
Luis Suarez and Lionel Messi during Barcelona training in August
footballPete Jenson co-ghost wrote Suarez’s autobiography and reveals how desperate he's been to return
News
newsMcKamey Manor says 'there is no escape until the tour is completed'
Voices
Hunted: A stag lies dead on Jura, where David Cameron holidays and has himself stalked deer
voicesThe Scotland I know is becoming a playground for the rich
News
people
PROMOTED VIDEO
Arts and Entertainment
Architect Frank Gehry is regarded by many as the most important architect of the modern era
arts + entsGehry has declared that 98 per cent of modern architecture is "s**t"
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
newsSam Smith’s Mobo triumph is just the latest example of a trend
News
Laurence Easeman and Russell Brand
people
Sport
Fans of Dulwich Hamlet FC at their ground Champion Hill
footballFans are rejecting the £2,000 season tickets, officious stewarding, and airline-stadium sponsorship
News
Shami Chakrabarti
people
Arts and Entertainment
Benedict Cumberbatch has refused to deny his involvement in the upcoming new Star Wars film
filmBenedict Cumberbatch reignites Star Wars 7 rumours
Sport
football
News
news
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Data Analyst/Planning and Performance – Surrey – Up to £35k

    £30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker