Scots Money Managers Like Regional Banks Whether Obama or Romney

Scottish money managers are investing in U.S. regional banks, betting they will do well as the economy improves whoever wins the presidential race today.

Aberdeen Asset Management Plc (ADN), Scotland’s largest fund company, owns Little Rock, Arkansas-based Bank of the Ozarks Inc., which has risen 8 percent this year. Edinburgh-based Scottish Widows Investment Partnership this year bought shares in SunTrust Banks Inc. (STI), which gained 53 percent through Nov. 2, and Ohio lender KeyCorp (KEY), up about 9 percent.

“The regional banks are more leveraged to benefit from an improving economic recovery than the larger banks,” James Kinghorn, a fund manager at Scottish Widows Investment, said in an interview. “They are better relative to European banks but they are also attractively valued. The U.S. economy has much more scope to surprise positively than many other regions.”

The last jobs report before U.S. voters choose between President Barack Obama and Republican challenger Mitt Romney today showed hiring increased more than forecast in October, adding to signs the economy may be sustaining its recovery.

A net 171,000 workers were added to payrolls in October after a 148,000 gain in September that was more than first estimated, Labor Department figures showed last week. The increase exceeded the most optimistic forecast in a Bloomberg survey in which the median called for an advance of 125,000.

Surprising Investors

“Regional banks have got the ability to surprise investors and move forward in terms of earnings,” Paul Atkinson, the Philadelphia-based head of North American equities at Aberdeen Asset Management, said by telephone. “If the market does run next year, you will need to be in financials.”

They also both hold shares in Wells Fargo, the biggest U.S. bank by market value, which has gained 23 percent this year. Atkinson said he has been adding to his holding.

Aberdeen, Scotland’s largest manager, had 184.3 billion pounds ($297 billion) under management at Aug. 31, according to a statement on Sept. 24. Scottish Widows Investment, part of Lloyds Banking Group Plc (LLOY), oversaw 138.3 billion pounds at the end of June, according to its website.

The two say their investment strategy doesn’t depend on the outcome of the election, which polls show is too close to call.

Obama led Romney 48 percent to 45 percent in an Oct. 31- Nov. 3 national poll conducted by the Pew Research Center, a survey that was deadlocked at 47 percent each a week ago. Polls conducted by NBC News with the Wall Street Journal and ABC News with the Washington Post showed a one percentage point lead for Obama. That was inside the margin of error for both surveys.

Harley-Davidson

Other stocks that Kinghorn at Scottish Widows Investment likes include motorcycle maker Harley-Davidson Inc. (HOG), which has advanced 22 percent this year, McKesson Corp. (MCK), the largest U.S. drug distributor, up 20 percent, Rayonier Inc. (RYN), a forestry products company that’s up 10 percent, and SolarWinds Inc. (SWI), a stock that’s 81 percent higher this year.

He also holds American Express Co. (AXP), up 20 percent, and Royal Caribbean Cruises Ltd. (RCL), rising 40 percent. They compare with a 12 percent gain in the Standard & Poor’s 500 Index.

Atkinson favors consumer-related stocks such as PepsiCo Inc. (PEP) and Procter & Gamble Co. (PG), which he said are able to benefit from higher spending Asian consumers. PepsiCo has gained 4.1 percent, while Procter & Gamble has risen 3.7 percent.

He also invests in energy services companies where he has been adding to holdings in National Oilwell Varco Inc. (NOV), which is up 5.4 percent so far this year.

Aberdeen prefers building materials suppliers such as Drew Industries Inc. (DW), up 29 percent this year, and Gibraltar Industries Inc. (ROCK), which has fallen 12 percent.

To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.

To contact the editor responsible for this story: Rodney Jefferson at r.jefferson@bloomberg.net

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