Scottish Widows Investment Partnership, the Edinburgh money manager that’s overhauling its stocks business, expects the U.S. economic recovery and developments in shale gas to help boost performance.
Stock picks in recent months include software maker SolarWinds Inc., TripAdvisor Inc. (TRIP), the online travel-recommendation service spun off from Expedia Inc. in December, and flooring company Mohawk Industries (MHK) Inc., according to William Low, head of global equities.
“I’m not saying the U.S. is the most perfect economy in the world and is going through fantastic growth in the way it would have done in the mid-1990s, but it’s in a better position than many other economies today,” Low said in an interview at his office in the Scottish capital.
Scottish Widows, part of Lloyds Banking Group Plc (LLOY), is in the middle of a revamp after sub-par returns, leading to the departure of 27 money managers including Peter Cockburn, its head of U.K. stocks. The company, which oversees about 140 billion pounds ($226 billion), will decide on who is staying later this month, with nine of the 14 remaining positions in the team researching and picking stocks under review.
“There’s a lot of fantastic talent here but unfortunately there aren’t seats at the table for all of them,” Low, who joined the firm in April last year from BlackRock Inc. to run global stocks business, said on May 3.
Low’s group picks stocks and then applies the investment strategy across the range of products they manage, he said. He is responsible for a total of about 3 billion pounds.
Shares in Austin, Texas-based SolarWinds (SWI) has soared 68 percent this year, while TripAdvisor (TRUP), located in Newton, Massachusetts, is up 60 percent and Mohawk Industries from Calhoun, Georgia, advanced 23 percent.
U.S. gross domestic product, the value of all goods and services produced in the country, expanded in the first quarter at a 2.2 percent annual rate, according to Commerce Department figures released last month. That followed a 3 percent pace in the prior quarter and compared with the 2.5 percent median forecast of economists surveyed by Bloomberg News.
The 20 million-pound SWIP Global Fund ranked 64 out of 215 peers over the past year, losing 2.45 percent, compared with an average decline of 5.35 percent, according to Morningstar Inc. It gained 26.5 percent over the past three years, trailing the average 31 percent advance and ranking 130th of 187 funds.
Low said in an interview in February the firm added to Wells Fargo & Co. shares and also bought Wal-Mart Stores Inc., the world’s largest retailer. About 54 percent of the money in global stocks is invested in the U.S., he said.
The decline in domestic energy prices related to shale gas and the functioning of credit within the economy are two reasons why Scottish Widows Investment is bullish on the U.S., Low said. Natural gas prices have fallen 23 percent in the U.S. so far this year, according to data compiled by Bloomberg.
The dollar declined 3 percent against the euro in the first quarter, according to data compiled by Bloomberg.
“There’s a weak dollar and a reindustrialization of the U.S. going on, so it’s actually cheaper to set up and build businesses,” he said. In addition, the decline in prices and export potential for shale gas mean “longer term the implications are actually quite massive,” he said.
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