Managers, he said, need to remember that equities are not just a one-way ticket.
In the six months since that statement, it is fair to say that, that fear once more stalks the markets, but the results have not quite been what Buxton was expecting.
“It has not resulted in a significant drop in prices, but rather in a big rotation back into large and mega-cap stocks,” he told Portfolio Adviser on his one year anniversary as manager of the OMGI UK Alpha fund.
While Buxton remains bullish about the long term prospects for equities, unlike 2009 or 2010, there are very few “screamingly cheap” shares he said.
As a result, he added: “While the index is still flirting with its highs, most fund managers are underperforming and the complacency that seemed to be setting in toward the end of last year is no longer.”
So where is he putting his money now?
Given the way the market is currently placed, Buxton said, a lot of his recent moves have been adding or subtracting from existing positions, rather than selling out of anything or buying something new.
“I have been buying Barclays recently, it is now over 4% of the fund. The market is utterly disillusioned with it, but we are rather enthusiastic about it,” he said.
Buxton also remains a fan of Lloyds, which also comprises around4% of the fund, but is less enthusiastic about TSB which the bank plans to spin out later this year.
“Lloyds put the TSB range out at a discount to book value. We feel it faces a long haul to get to profitability and it is not without risk, whereas something like Barclays has been discounted by the market and it is already paying a dividend.”
According to the fund’s May fact sheet, financials make up 22.5% of the fund, the second largest sectoral holding after consumer discretionary stocks.
According to Buxton, while cheap shares are fewer and farther between than they once were, there remain a few that are still good value.
“Ladbrokes, Debenhams, iCap, I think these are cheap shares,” he said.
What about the old fund?
Since his departure from Shroder Investment Management last year, there is little to choose from between his new fund, the Old Mutual Alpha fund and the Schroder UK Alpha Plus Fund he left behind.
On a one year basis, the two basically match each other, in performance terms although the Shroder fund is currently doing slightly better, up 14.5% over one year, compared to 13.05% for the Old Mutual fund.
The Shroder fund is also heavily weighted toward financials, but at 19.6% is below the benchmark weighting of 24%, according to its May factsheet.
Looking ahead
In the long term Buxton remains bullish and says it is far too soon to be selling out of cyclical stocks.
“This is the most elongated cycle I have been through, I still think we are early into the economic up-turn. It has been incredibly long-term, drawn-out process.”
In the short term, however, he is keeping a watchful eye on events in the Middle East.
“Every time oil prices have spiked, global growth has slowed,” he said. But, added, in the medium term, central banks will remain supportive as the post financial crisis healing is not yet complete.”
