IT, consumer discretionary and industrials target of UBS US Growth fund

Earnings growth among US companies in the IT, consumer discretionary and industrials sectors are set to drive returns from the UBS US Growth fund this year, the manager says.

Grant Bughman, client portfolio manager (pictured), confirmed that the fund has a 3.4% overweight across these three sectors relative to the benchmark Russell 1000 Growth index.

The consumer discretionary space sees the fund taking a high level of exposure to upmarket apparel and ecommerce.

In industrials, the opportunity is seen in aerospace, which UBS believes is in the early stages of a cycle that is being driven by increasing production of fuel efficient aeroplanes. Railroads across North America are also set to benefit from increased economic activity and pricing power.

“Fundamentals are likely to generate accelerating earnings growth this year as the recovery gathers pace. We estimate S&P 500 EPS of $118 for 2014, implying a market multiple of 15.1x. Given accommodative monetary policy, low inflation pressures and a still wide equity risk premium relative to history, we are optimistic for the year ahead.”

Key underweights from a US growth perspective include consumer staples, although certain areas such as food companies are benefitting from “healthier eating habits and lower soft commodity prices.”

The fund’s top five overweight stocks are: Salesforce.com, Precision Cast Parts, Priceline.com, Google and Visa.

 

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