INTERVIEW
Matthew Stylianou
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23
The pharmaceutical industry
has been one of your big bets
and appears to be living up
to the promise, with corporate
actions like P zer’s interest
in AstraZeneca earlier this
year. Howdo you view the
industry now?
I still like the sector and think that
valuations are anomalously low. There
are attractive long-term fundamentals
in pharmaceuticals.The biggest one is
increasing R&D productivity, which will
help to deliver an exciting future for
investors in pharmaceuticals and, more
importantly, for patients.
There is generally a much brighter
future for the industry and for what it can
deliver.The record of innovation over the
past decade has been poor, and largely
driven by‘me-too’ type drugs.
This is beginning to change, however,
and as we look forward, the industry
should have a much more productive
period that will deliver tangible bene ts.
Youhave beennegative about
banking for some time. What are
your views now?
I have recently started to buy HSBC
because I think it looks cheap, but I remain
concerned about some of the global
macro trends for banks. I remain very
cautious about the domestic banks, which
I think are a long way from normalisation.
Does the size of a business
in uence your opinion?
What is important is that we are
convinced that a company, regardless of
its size, is attractively valued and capable
of delivering attractive long-term returns.
Nevertheless, it is fair to say that many of
the most attractive opportunities that we
nd are among the large caps.
The UK stock market as a whole is
broadly at year-to-date but clearly there’s
been a lot happening beneath the bonnet.
This isn’t just a UK phenomenon, either
– US and European markets have shown
a similar trend.We wouldn’t be surprised
to see continued outperformance of large
caps going forward as fundamentals and
valuations reassert themselves.
Where else do you see attractive
investment opportunities?
I still like the tobacco sector.There have
been occasions when it has been more
attractive from a valuation point of view,
but I still think that BritishAmerican
Tobacco and ImperialTobacco o er
good value for investors.There are fewer
sector themes than there used to be. For
example, I own BT, but that is not because
I am bullish about telecoms – I do not
ownVodafone, for example.
I own Reckitt Benckiser, but that is not
because I think consumer durables is an
attractive sector. I still think BAE Systems
is ridiculously cheap. Rolls-Royce is partly
in the defence industry, but its biggest
customers are in civil aircraft and business
jets. I am very keen on it – the price has
fallen recently on very spurious concerns
that I am not at all perturbed by.
FUND FIGURE
£28.5bn
Weighted average market
cap for the UK High
Income Unit Trust
(31 May 2014)
