Market commentary or fund strategy at this time is often
out of date within a very short period of time. Therefore, this
update is a brief factual overview of performance and stock
contributors over the month of February. We are all too aware that
accurate and timely communication is vital to both you and your
clients, so for the most up-to-date information please contact your
usual Gartmore representative.
To view individual fund commentaries
please click on one of the below links:
Gartmore Cautious
Managed Fund
Gartmore China
Opportunities Fund
Gartmore Corporate Bond
Fund
Gartmore
Emerging Markets Opportunities Fund
Gartmore
European Selected Opportunities Fund
Gartmore UK Alpha Fund
Gartmore UK Equity
Income Fund
Gartmore US Growth
Fund
Gartmore US Opportunities
Fund
For professional investors only. Not to be circulated to retail
investors.
Gartmore Cautious Managed
Fund
| • |
Economic news has been mixed over the past month, with
inflation accelerating |
| • |
View remains that we could be facing a very volatile world over
the next year |
| • |
Relatively low activity, but some profitable sales and several
new positions opened |
Review
Economic news has been mixed over the past month. Official figures
showed that inflation, one of our key worries for 2010, accelerated
to 3.5% in January, the fastest for over a year. Although this is
well in excess of the 2% target, it was largely due to the VAT rise
in the same month, and therefore at this stage is only viewed as a
temporary spike. The Bank of England released a slightly more
dovish statement, leading to speculation that quantitative easing
could be extended in the future if conditions require it. However,
for the time being there has been a pause in the quantitative
easing program and the policy rate remains at its historic low of
0.5%.
UK equities rose over the month, with mining and banks returning to
favour again, although there were also good returns from some key
defensive sectors such as pharmaceuticals, tobacco and aerospace
& defence.
The Gartmore Cautious Managed Fund returned 0.3% for the month of
February, below the IMA Cautious Managed Sector Average return of
1.3%. Positives included our overweights in BAE Systems and
Halfords, while detractors among the equity positions included, not
surprisingly, limited exposure in miners and banks. Activity has
been quite low again this month, with profitable sales of British
Land bonds and Premier Farnell shares. We also initiated new bond
positions in Standard Chartered and Juneau Investments, and a new
equity holding in Hays.
Outlook
At the risk of sounding hackneyed, our view remains that we could
be facing a very volatile world over the next year. We still hold
the same concerns surrounding inflation, the impact of reduced
government spending and the eventual withdrawal of monetary
stimulus.
We are also concerned at the assumption that international
recovery, particularly coming from emerging markets, will support
the UK in the medium term. At the time of writing, it has been
reported that the January's trade deficit widened to the worst
monthly decline since July 2006. Given the sterling weakness that
should favour exports, this raises doubts about the prospect of an
export-led recovery.
Our diversified nature and the balance of the portfolio gives us
the opportunity not to be whip-sawed. The large defensive stocks
are still cheap and they still have the scope to perform well and
produce good dividend growth. That's not to say that
recovery-oriented stocks are being disregarded, as we had some very
strong results from those that we held last year, but at this time
they are a very small part of the portfolio.
Important
Information
Source for all fund performance data: Lipper. Basis: Mid to mid,
net income reinvested and net of fees in UK sterling terms as at
28.02.10, unless otherwise stated. Past performance is not a guide
to future performance. The value of investments can go down as well
as up and you may not get back your original investment. When a
fund holds high yielding bonds there is an increased risk of
capital erosion through default or if the underlying yield is below
the distribution yield. You should also be aware that economic
conditions and changes to interest rate levels may significantly
impact the values of high yield bonds. The annual management fee is
currently charged to the capital of the Fund. Whilst this increases
the yield, it will restrict the potential for capital growth. The
level of yield may be subject to fluctuation and is not guaranteed.
Please ensure your clients read the Simplified Prospectus before
investing. The opinions expressed reflect Gartmore's views as at 15
March 2010 and are subject to change.
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Gartmore China Opportunities
Fund
| • |
Concerns of a prolonged programme of monetary tightening in
China are being digested |
| • |
Overweight in information technology and industrials added
value whilst an underweight in financials detracted |
| • |
The Zhong Hua Index outperforms all major Pacific and Emerging
Markets indices |
Review
The Gartmore China Opportunities Fund rose by
7.9% in February, while the MSCI Zhong Hua Index gained 8.1%. Over
the past three months, the Fund has risen by 4.8% while the Index
has gained just 2.8%.
Our overweight holdings in Ctrip.Com International and Baidu
contributed most to performance in February. Ctrip.com benefitted
from the continued recovery in passenger travel in China and
bounced back after giving the market traditionally cautious
guidance numbers of 30% year on year revenue growth. Baidu advanced
on news of strong revenue and profits growth in the final quarter
of 2009 and expectations that the company will gain market share
should Google exit China.
Our overweights in Gome and Ports Design were the key detractors
over the month. Gome's weakness in February came from competitor,
Suning Appliance Co.'s ambitious expansion plans, old news of the
ex-Chairman's history resurfacing and recent property market
weakness suggesting future demand for home appliances could be
affected. However, we retain our conviction for Gome based on its
underlying business and robust trading revenues. Ports Design
suffered on news of a broker downgrade and, following a meeting
with management, we have exited our position due to concerns over
the management's strategy in countering stronger competition.
Over the month, we added to our positions in CNOOC and Singamas
Container Holdings. CNOOC plans to boost its oil & gas
production by 28% this year, whilst Singamas is a beneficiary of
improving dynamics and a recovery in exports in the shipping
containers market. After a strong performance from IT services
company, Digital China, we decided to buy back into Lenovo Group.
The company is well poised to take advantage of increasing consumer
demand in the personal computer industry and should benefit from
increased revenues generated from outside China in the broader
emerging markets.
Outlook
Concerns of a prolonged programme of monetary tightening in China
are being digested and confidence has increased that the global
economic recovery is taking hold. We are taking advantage of any
pull backs in the market, topping up several stocks during the
month at attractive valuations. Our conviction plays are borne out
in our overweights in the information technology, consumer and
industrials sectors where we aim to exploit opportunities in
companies exhibiting strong balance sheets and solid earnings
growth. We continue to take advantage of strong export growth,
driven by increasing overseas demand and falling freight
rates.
Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid,
net income reinvested and net of fees in UK sterling terms as at
28.02.10, unless otherwise stated. Past performance is not a guide
to future performance. The value of investments can go down as well
as up and you may not get back your original investment. The Fund
can invest in smaller companies which can be more risky than
investing in larger companies due to lack of liquidity and
increased volatility. Emerging markets tend to be more volatile
than more established stock markets and therefore your money is at
greater risk. Other risk factors such as political and economic
conditions should also be considered. Funds investing in overseas
securities are exposed to and can hold currencies other than
sterling. As a result, exchange rate movements may cause the value
of investments to decrease or increase. Please ensure your clients
read the Simplified Prospectus before investing. The opinions
expressed reflect Gartmore's views as at 15 March 2010 and are
subject to change.
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Gartmore Corporate Bond
Fund
* Please note that the Gartmore Corporate Bond Fund
was launched on 18.07.09 to receive the assets of the Rensburg
Corporate Bond Trust (managed by John Anderson) on the merger of
the two funds on 18.07.09. Performance figures prior to 18.07.09
reflect the performance of the Rensburg Corporate Bond Trust
converted from an offer to offer basis to a mid to mid basis. The
benchmark index changed to the iBoxx Sterling Non-Gilts Index on
18.07.09.
| • |
Duration lowered further |
| • |
Bullish month for spreads, risk taken off the table |
| • |
Exposure to high quality debt
increased |
Performance
Over the month of February the Gartmore
Corporate Bond Fund outperformed the Markit iBoxx Sterling Non Gilt
Index and the IMA £ Corporate Bond Sector Average, ranking the Fund
in the first quartile. Long term performance remains strong with
the Fund ranked in the first quartile over 2, 3, 4, 5 and 10
years*.
Economic and Market background Sovereign issues adversely impacted
risk assets in February. Members of the European Union pressed
Greece to take action to address its budget shortfall. The
revelation that the Greek deficit was approximately three times
larger than had been thought has led the Euro to weaken, and
prompted renewed interest in the financing requirements of the
peripheral PIIGS (Portugal, Ireland, Italy, Greece and
Spain).
Sovereign debt rallied in the last week of February to outperform
both corporate bonds and high yield over the month. US and UK
equities outperformed credit in February, whereas the reverse was
true in Europe.
Investment Strategy
The Fund activity in February
mirrored January's actions. We continued to trim duration on the
Fund, wary of current low inflation expectations. Although the
prospects of surging inflation remain remote, we are uncomfortable
with the assumption that inflationary pressures will abate
eventually. We are of the view that a weakening sterling combined
with rising food and oil prices could conspire to keep inflation
above the Bank of England 2% target rate for some considerable
time.
Upping the quality of the portfolio was another key aspect of
portfolio activity in February. We took advantage of strong
performance of some of our lower quality names and invested in
squeaky clean, AA or AAA investment grade names such as Procter
& Gamble and Johnson & Johnson.
We reduced our weighting in certain stocks which were starting to
look somewhat rich, such as US investment bank Goldman Sachs, as
well as UK retailers Marks & Spencer and Safeways.
Over the last several weeks, the high yield weighting on the
Gartmore Corporate Bond Fund has increased. Although last year's
returns were a once in a lifetime affair, in our view the stable
returns of 7-10% we expect this year in the high yield market look
attractive relative to government debt and investment grade bonds.
At present high yields stocks compare favourably to other fixed
income assets, and offer further spread tightening potential given
the outlook for default rates.
We continue to shun gilts. The asset class, still reeling from the
destabilising effect of quantitative easing, has been adversely
impacted from the consequences of the Greek deficit.
Outlook
Ten-year gilts are yielding around 4% which, in
our view, does not represent good value for money. Rising food and
oil prices combined with further sterling weakness are likely to
hinder gilts and investment grade bonds in the near term.
Nevertheless we continue to like corporate bonds in relative terms
and remain bullish on high yield stocks.
Important
Information
Source for all fund
performance data: Lipper. Basis: Mid to mid, net income reinvested
and net of fees in UK sterling terms as at 28.02.10. Past
performance is not a guide to future performance. The value of
investments can go down as well as up and you may not get back your
original investment. This Fund invests in bonds and other fixed
income securities and derivatives which collectively may be more
volatile than a fund investing solely in cash or bonds. The Fund
may trade instruments which are not exchange traded and therefore
contain the risk a counterparty may not be able to honour its
contractual obligations. Currently, the annual management charge is
taken from the capital of the Fund, which will increase the income
yield, but restrict the potential for capital growth. Yields may
change in the opposite direction to interest rates, however, not by
the same increments. The Fund invests in corporate bonds whose
prices are aligned with the credit worthiness of the underlying
corporate. A deterioration in a corporate credit rating may have a
negative impact on the bonds price. Derivatives may be used for the
purpose of efficient portfolio management. However, appropriate
risk monitoring will ensure that there is no significant increase
in a fund's risk profile. Derivatives will not be used for
investment purposes. Please ensure your clients read the Simplified
Prospectus before investing. The opinions expressed reflect
Gartmore's views as at 15 March 2010 and are subject to
change.
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Gartmore
Emerging Markets Opportunities Fund
| • |
First quartile returns over three and six months |
| • |
Baidu benefits from expectations of Google exit from
China |
| • |
Raising consumer exposure in China and South
Africa |
Review
The Gartmore Emerging Markets Opportunities Fund
rose by 6.9% in February, while the MSCI Emerging Markets Index and
the IMA Global Emerging Markets Sector Average gained 5.7% and 5.4%
respectively. The Fund was ranked third of the 37 funds in its peer
group over the month.
Overweight holdings in China's Internet search operator Baidu and
the Indian iron-ore miner Sesa Goa delivered good returns in
February. Baidu advanced on news of strong revenue and profits
growth in the final quarter of 2009 and expectations that the
company will gain market share should Google exit China. Higher
iron-ore prices, higher production and improving profitability
contributed to a sharp increase in quarterly net profits at Sesa
Goa.
Least successful was our overweight in the Turkish bank Garanti. A
consistent outperformer over the past year, Garanti's latest
quarterly results showed a further rise in net interest income,
lower provisions and higher earnings. However, reports that GE
Capital plans to sell its stake in Garanti weighed on the stock in
February. We believe that such downward pressures should prove
temporary and we retain our position.
Relatively insulated from global monetary constraints, we believe
that South Africa has the potential to rebound sharply this year.
In February, we initiated a position in the motor dealership
Imperial Holdings and added to our investment in the discount
retailer Shoprite. Importantly for Imperial Holdings, new vehicle
sales in South Africa appear to have stabilised. In addition, a
strong rand promises lower import costs and higher margins.
We also invested in Lianhua Supermarket Holdings, a beneficiary of
strong consumption growth in China. Conversely, we sold our holding
in the Brazilian telecoms company TNE. This company's merger with
Brasil Telecom has been delayed by write-downs in the latter's
asset values.
Outlook
There has been a shift in market focus since the
beginning of the year. In 2009, the focus was on government
stimulus programmes and how property and other 'large-ticket' sales
were driving domestic economic recoveries. Now investors are
interested in where the growth will come from in 2010 and the focus
has moved to supermarkets and the branded goods they sell. The Fund
has a substantial exposure in this area, with holdings in Brazil's
CBD and Wal-Mart de Mexico along with Shoprite and Lianhua.
Outside the consumer sector, we continue to identify many other
attractive investment opportunities in emerging markets. With
corporate earnings set to grow strongly this year and the world
economy strengthening, there is now clearer evidence of an earnings
recovery and rebounding cash generation across a broad range of
sectors and industries. The Fund has a healthy exposure to energy
(e.g. Petrobras and Rosneft) and materials producers (e.g. Grupo
México and POSCO).
Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid,
net income reinvested and net of fees in UK sterling terms as at
28.02.10, unless otherwise stated. Past performance is not a guide
to future performance. The value of investments can go down as well
as up and you may not get back your original investment. This Fund
invests in emerging markets, which tend to be more volatile than
more established stock markets and therefore your money is at
greater risk. Funds investing in overseas securities are exposed to
and can hold currencies other than sterling. As a result, exchange
rate movements may cause the value of investments to decrease or
increase. In addition, the Fund can invest in smaller companies
which can be more risky than investing in larger companies due to
lack of liquidity and increased volatility. Please ensure your
clients read the Simplified Prospectus before investing. The
opinions expressed reflect Gartmore's views as at 15 March 2010 and
are subject to change.
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Gartmore
European Selected Opportunities Fund
| • |
Greece's credit ratings dominated the market's agenda |
| • |
Appetite for risk assets languished |
| • |
Western world equities are more likely to produce positive
surprise |
Review
Over the month of February, the Gartmore
European Selected Opportunities Fund delivered 2.3%,
underperforming the IMA Europe ex UK Sector Average (2.5%) and the
FTSE World Europe ex UK Index (2.7%). Uncertainty reigned over the
month as fears about sovereign defaults intensified. The threat of
further downgrades to Greece's credit ratings dominated the
market's agenda over the month. Aside from worries that Greece is
the tip of a broader problem for some of the more vulnerable
members, anxiety about central banks weaning markets away from
extraordinary support measures remained high. Against that
backdrop, appetite for risk assets languished.
We created three new holdings in the oil services sector via CGG
Veritas, Petroleum Geo-Services and Fugro where we were encouraged
by signs of increased exploration spend by the oil majors. We also
added to the technology sector via Infineon and ST Microelectronics
as we increased the Fund's exposure to technology. Disposals over
the month focused on the auto sector as we sold out of Fiat and
Renault to reduce exposure to the sector which we believe continues
to be plagued by overcapacity.
The Fund's positive contributors to performance were led by
Novartis, Swedish Match and Zurich Financial Services, the latter
responding well to its results announcement. Shares in Novartis
advanced as investors reassessed the Alcon deal, while Swedish
Match gained in line with global tobacco stocks.
The principal negative contributors to performance were led by
Continental following a recent placing. Elsewhere Carlsberg and
Bayer also weighed on performance as both stocks fell ahead of
their results announcements.
Outlook
We are struck by the overwhelming 'manage for
cash' mode in which most corporates remain. It is clear that the
corporate world continues to cut as much cost as possible, while
hoarding cash. On the plus side, any return of top line growth
(Gross Domestic Product recovery) will result in impressive
operational gearing, to the great benefit of shareholders. On the
negative side, when you have a western world where both the
corporate and consumer sectors are hoarding cash, it is hard to see
vigorous GDP recoveries. Thus, we continue to favour cash rich
sectors such as IT and pharmaceuticals, both of which are also
seeing substantial industry change.
As for the wider market, we continue to believe that out of favour
western world equities are more likely to produce positive surprise
than the more popular eastern theme.
Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid,
net income reinvested and net of fees in UK sterling terms as at
28.02.10. Past performance is not a guide to future performance.
The value of investments can go down as well as up and you may not
get back your original investment Funds investing in overseas
securities are exposed to and can hold currencies other than
sterling. As a result, exchange rate movements may cause the value
of investments to decrease or increase. In addition, the Fund can
invest in smaller companies which can be more risky than investing
in larger companies due to lack of liquidity and increased
volatility. Please ensure your clients read the Simplified
Prospectus before investing. The opinions expressed reflect
Gartmore's views as at 15 March 2010 and are subject to
change.
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Gartmore UK Alpha Fund
| • |
Economic news has been mixed |
| • |
Focusing on individual stock fundamentals |
| • |
New holding in Dairy Crest |
Review
February feels like it's been a horrible month where anything that
can go wrong has, across sectors, apparently in a random pattern -
and hitting some of our larger positions. Ultimately UK equities
rose over the month, although it was in a rather mixed fashion.
Mining and banks returned to favour, but there were also good
returns from some key defensive sectors such as pharmaceuticals,
tobacco, and aerospace & defence.
Economic news has been mixed, reinforcing our belief that the
current climate remains uncertain. Official figures showed that
inflation accelerated to 3.5% in January, the fastest for over a
year. Although this is well in excess of the 2% target, it was
largely due to the VAT rise in the same month, and therefore only
expected to be a temporary spike. The Bank of England released a
slightly more dovish statement, leading to speculation that
quantitative easing could be extended in the future if conditions
require it. However, for the time being there has been a pause in
the quantitative easing program and the policy rate remains at its
historic low of 0.5%.
One of our new holdings this month was food producer Dairy Crest.
Having suffered through 2008 with relatively high levels of debt,
Dairy Crest management have focused on extracting the most from
existing operations and generating as much cash as possible without
destroying the fabric of the business. The debt today is 25% lower
than two years ago and sales of its five core brands (Cathedral
City, Clover, Country Life, Frijj and St Hubert) are all
experiencing double digit growth. The company is implementing a
number of efficiency measures, such as investing further in its
dairies and introducing new systems to enable faster collection of
payments from customers. Now standing on 9.2x EV/EBIT and offering
a 5.3% yield, the shares are appealing.
Outlook
Whilst we feel that there is significant value in
markets at present in a range of different sectors, market
movements are being driven more by shorter term macro and political
issues, both domestically and on a more global basis. We continue
to believe that it is right to focus on individual stock
fundamentals, with the market continuing to be 'whip-sawed' around
with endless debate on sovereign balance sheets, Greek civil unrest
and so on. All of this perhaps suggests the UK may be next in the
firing line, as the near 5% fall in sterling against the US dollar
in February perhaps warns. The uncertainty created by the long run
into a general election will not help and the markets simply want a
decision so that investors can focus on fundamentals once
more.
Important
Information
Source for all fund performance data: Lipper. Basis: Mid to mid,
net income reinvested and net of fees in UK sterling terms as at
28.02.10, unless otherwise stated. Past performance is not a guide
to future performance. The value of investments can go down as well
as up and you may not get back your original investment. The
Gartmore UK Alpha Fund invests in shares, which are more volatile
than other asset classes such as cash or bonds. The Fund may hold
concentrated positions. If one of these concentrated positions
declines in value, or is otherwise adversely affected, this can
have a greater effect on the Fund's value than if it held less
concentrated positions. The Fund may hold a limited number of
investments. If one or more of these investments declines in value,
or is otherwise adversely affected, this can have a greater impact
on the Fund's value than if a larger number of investments were
held. The Fund can invest in smaller companies which can be more
risky than investing in larger companies due to lack of liquidity
and increased volatility. Funds with an emphasis on a particular
sector or geographical area are exposed to a higher risk of
volatility than a fund which is more broadly diversified. Please
ensure your clients read the Simplified Prospectus before
investing. The opinions expressed reflect Gartmore's views as at 15
March 2010 and are subject to change. As of 4 January 2010, the
name and objective of the Gartmore UK Alpha Fund was changed from
the Gartmore UK Focus Fund.
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Gartmore UK Equity Income
Fund
| • |
Mixed economic news over the month |
| • |
Activity on the Fund a little higher this month, with higher
quality companies attractive |
| • |
Outlook has not changed significantly |
Review
Economic news was mixed over the month. Inflation accelerated to
3.5% in January, the highest for over a year and well in excess of
the 2% target. A little digging shows much of the rise is due to
the recent VAT increase and as such it's only expected to be a
temporary spike. The Bank of England released a slightly more
dovish statement and hinted that quantitative easing could be
extended in the future if deemed necessary. However, for the time
being it has been halted and the policy rate remains at its
historic low of 0.5%. GDP figures for the final quarter of 2009
were revised upwards in the last week of February, but remain below
the original consensus expectation for growth during that
period.
Activity on the Gartmore UK Equity Income Fund has been a little
higher this month, partly due to the seasonal raft of results which
give a chance to update valuations and reassess the investment
case. We added to our recent additions, such as Bunzl and Cobham,
and initiated a new position in Britvic. Our top-performing
position for the month was VT Group, which rose sharply on news of
a takeover approach from Babcock. We have now exited the holding
and reinvested the proceeds.
Over February the Fund delivered a return of 1.5%, broadly in line
with the IMA UK Equity Income Sector Average. Our underweight
exposure to banks and mining detracted after both sectors returned
to favour and delivered strong gains over the month. However, there
were also good returns from some key defensive sectors such as
utilities, tobacco and aerospace & defence.
Outlook
Despite a strong recovery in the market since
the sell-off in late January our outlook has not changed
significantly. We observe that corporate profitability has been
extremely resilient and that forward-looking estimates are for
strong growth in earnings. The upshot is that aggregate forecasts
are looking for new highs in profitability in the coming year.
Given the issues that need to be worked through - government
deficits, withdrawal of stimuli, higher taxes, more regulation, etc
- we see this outcome as far from certain.
As a result, we are allocating capital to stocks where valuations
can be justified by current profitability rather than requiring any
dramatic recovery in sales or margins. This is tending to lead us
towards 'higher quality' companies - where returns are high and
stable and balance sheets are strong.
Important
Information
Source for all fund performance data: Lipper. Basis: Mid to mid,
net income reinvested and net of fees in UK sterling terms as at
28.02.10, unless otherwise stated. Past performance is not a guide
to future performance. The value of investments can go down as well
as up and you may not get back your original investment. The Fund
can invest in smaller companies which can be more risky than
investing in larger companies due to lack of liquidity and
increased volatility. The annual management fee is currently
charged to the capital of the Fund, which may restrict the
potential for capital growth. Funds with an emphasis on a
particular sector or geographical area are exposed to a higher risk
of volatility than a fund which is more broadly diversified. Please
ensure your clients read the Simplified Prospectus before
investing. The opinions expressed in reflect Gartmore's views as at
15 March 2010 and are subject to
change.
Back to
top
Gartmore US Growth Fund
| • |
US equities rebound in February |
| • |
Union Pacific benefiting from increase in cyclical railroad
traffic |
| • |
Cisco Systems bolsters the Fund's technology
overweight |
| • |
Q4 corporate earnings have surprised to the
upside |
Review
The Gartmore US Growth Fund rose by 7.4% in
February, while the S&P 500 Index gained 8.5% and the IMA North
America Sector Average added 7.9%. The Fund's overweight holdings
in Baidu and Union Pacific delivered the month's strongest returns.
China's internet search operator Baidu advanced on news of strong
revenue and profits growth in the final quarter of 2009 and
expectations that the company will gain market share should Google
exit China. Union Pacific benefitted from data confirming an upturn
in railroad traffic, particularly in respect of cyclical freight
loads (e.g. chemicals, metals and autos).
The principal detractor in February was an overweight in the
payments processor MasterCard. The company's shares fell back in
early February after results for the December quarter came in
slightly below expectations. However, management guided for
earnings growth in the range 20% to 30% this year together with a
higher operating margin. The company reports also that transaction
volumes have accelerated into the first quarter.
Fund manager Tom Marsico sold the Fund's positions in HSBC and
Petrobras during February and started a new holding in Cisco
Systems, a company that makes switches and routers for the
Internet. Cisco is a beneficiary of the 'wireless bottleneck' which
has arisen due to the strong take-up of smartphones and attendant
increase in data transmission. Additionally, Cisco is a beneficiary
of increasing enterprise IT spending by businesses. As the largest
company operating in its industry, Cisco also benefits from scale
and has a pricing edge.
Currently the Fund is most overweight information technology
(Apple, Google, IBM) materials ((Dow Chemical, Praxair, BHP
Billiton) and consumer discretionary companies (Amazon.com,
McDonald's, Nike). The Fund is slightly overweight financials
(JPMorgan Chase, Wells Fargo, US Bancorp). These positions are held
principally at the expense of sectors with more defensive
characteristics, notably consumer staples and utilities.
Outlook
The question remains as to whether the US can
transition from recovery mode to a sustainable expansion. The
housing market is still weak and employment growth remains elusive.
The Federal Reserve Bank's decision to raise its Discount Rate by
0.25% last month has intensified the debate about the possible
ending of an "ultra-accommodative" US monetary stance.
However, recent data has, in the main, pointed to incremental
improvements in the US economy. Durable goods orders rose strongly
in January, as consumer discretionary spending increased for a
fourth consecutive month. Many US businesses are beginning to
rebuild their inventories and a rebound in railroad traffic would
suggest that imports are growing in order to meet stronger final
demand. Meanwhile, in aggregate, fourth-quarter corporate earnings
reports have surprised to the upside. These factors support our
view that the US economy will continue to recover this year.
Against this backdrop, we continue to identify and invest in a
range of attractive opportunities in the equity
market.
Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid,
net income reinvested and net of fees in UK sterling terms as at
28.02.10, unless otherwise stated. Past performance is not a guide
to future performance. The value of investments can go down as well
as up and you may not get back your original investment. Funds
investing in overseas securities are exposed to and can hold
currencies other than sterling. As a result, exchange rate
movements may cause the value of investments to decrease or
increase. The Fund is permitted to, and may hold, a limited number
of investments from time to time. Should one or more of these
investments decline or be otherwise adversely affected, it may have
a more pronounced effect on the Fund's value than if a larger
number of investments were held. In addition, the Fund can invest
in smaller companies which can be more risky than investing in
larger companies due to lack of liquidity and increased volatility.
Please ensure your clients read the Simplified Prospectus before
investing. The opinions expressed reflect Gartmore's views as at 15
March 2010 and are subject to change.
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Gartmore US Opportunities
Fund
| • |
US equities rebound in February |
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CSX benefiting from increase in cyclical railroad
traffic |
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Beneficiary of online travel bookings joins the
portfolio |
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Q4 corporate earnings surprising to the
upside |
Review
The Gartmore US Opportunities Fund rose by 7.1%
in February, while the S&P 500 Index gained 8.5% and the IMA
North America Sector Average added 7.9%. Over the last six months,
the Fund has gained 18.9%, ranking sixth of the 83 funds in its
peer group.
The Fund's overweight positions in CSX and Cree contributed most
positively to performance in February. CSX, one of America's
largest freight railroad operators, benefited from data confirming
an upturn in railroad traffic, particularly in respect of cyclical
freight loads (e.g. chemicals, metals and autos). Meanwhile Cree, a
maker of LEDs used in energy-efficient lighting applications,
continued to outperform following strong results in January. While
LEDs are used widely in a range of niche applications, the growth
opportunity for Cree comes from their low penetration into the
general white-lighting market.
The principal detractor in February was an overweight in the
payments processor MasterCard. The company's shares fell back in
early February after results for the December quarter came in
slightly below expectations. However, management guided for
earnings growth in the range 20% to 30% this year together with a
higher operating margin. The company reports also that transaction
volumes have accelerated into the first quarter.
Fund manager Cory Gilchrist started a new position in Priceline.com
during the month. Priceline.com is a beneficiary of rising
international travel and the ongoing migration of bookings to the
Internet. This company has a strong record of beating earnings
estimates and stands to do well again this year as the global
cyclical recovery gathers pace.
Currently, the Fund is most overweight financials (JPMorgan Chase,
Wells Fargo, US Bancorp) and consumer discretionary companies
(Disney and Polo Ralph Lauren). The Fund's exposure to the
information technology sector (Apple, Google) has been reduced
following a period of very good relative performance, to slightly
underweight. Another favoured area is telecom services (Crown
Castle International). However, the Fund continues to hold
underweight positions in sectors with more defensive qualities,
notably utilities and consumer staples.
Outlook
The question remains as to whether the US can
transition from recovery mode to a sustainable expansion. The
housing market is still weak and employment growth remains elusive.
The Federal Reserve Bank's decision to raise its Discount Rate by
0.25% last month has intensified the debate about the possible
ending of an 'ultra-accommodative' US monetary stance.
However, recent data has, in the main, pointed to incremental
improvements in the US economy. Durable goods orders rose strongly
in January, as consumer discretionary spending increased for a
fourth consecutive month. Many US businesses are beginning to
rebuild their inventories and a rebound in railroad traffic would
suggest that imports are growing in order to meet stronger final
demand. Meanwhile, in aggregate, fourth-quarter corporate earnings
reports have surprised to the upside. These factors support our
view that the US economy will continue to recover this year.
Against this backdrop, we continue to identify and invest in a
range of attractive opportunities in the equity market.
Important Information
Source for all
fund performance data: Lipper. Basis: Mid to mid, net income
reinvested and net of fees in UK sterling terms as at 28.02.10,
unless otherwise stated. Past performance is not a guide to future
performance. The value of investments can go down as well as up and
you may not get back your original investment. Funds investing in
overseas securities are exposed to and can hold currencies other
than sterling. As a result, exchange rate movements may cause the
value of investments to decrease or increase. The Fund may, from
time to time, be significantly invested in smaller companies which
may be more risky than investing in larger companies due to lack of
liquidity and increased volatility. The Fund is permitted to, and
may hold, a limited number of investments from time to time. Should
one or more of these investments decline or be otherwise adversely
affected, it may have a more pronounced effect on the Fund's value
than if a larger number of investments were held. Please ensure
your clients read the Simplified Prospectus before investing. The
opinions expressed reflect Gartmore's views as at 15 March 2010 and
are subject to change.
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