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Ken Baksh – UK and US financials a hot sector for 2018?

Independent Investment Research

by Ken Baksh

Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.

Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.

Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.

Phone 07747 114 691


Polar Capital Global Financials Trust PLC (PCFT)

One of the sectors which may outperform next year, and which has received a barrage of better than expected news over the last few weeks could well be financials, especially UK and US names, which have lagged many other sectors over 2017 and offer good value on several investment ratios.

Over the last week investors poured $1.5 billion into funds that buy US financial stocks, extending a rotation into the area, on optimism about the prospects of lighter regulation and lower tax. The regulatory backdrop has become more favourable which increases the likelihood of buy backs and dividend increases, while the progression of tax cuts through Congress has further increased the positive sentiment. If that was not enough, the Federal Reserve is about to raise interest rates with the prospects of more hikes in 2018, further aiding the sector.

Meanwhile, across the pond, rules agreed following the Basel III agreement proved less onerous for European Banks than feared causing the start of a rally, led by Lloyds, which is strongly tipped to increase its dividend, and whose ordinary and preference shares are strongly on my buy list of direct stocks

A good way to gain this exposure is through the Polar Capital Global Financials Trust (PCFT-138p)

  • This investment trusts seeks to generate a growing dividend and capital appreciation by investing primarily in a global portfolio of securities issued by companies within the financial sector operating in the banking, insurance, property and other sub sectors.
  • The trust was launched in July 2013 since when the asset value and benchmark have outperformed the financial benchmark.
  • As at end November 2017, the fund was split geographically as 41% USA,34% Europe (incl UK) and 13% Asia (excl Japan). By sector banks represented over 63% with names such as JP Morgan, Bank of America, ING Group, Chubb, BNP Paribas, KBC, Sampo, Citigroup amongst the top holdings.
  • The trust currently trades at a discount to assets of around 4%.
  • The fixed life of May 2020 should limit significant discount widening and it should be remembered that the trust has traded at a premium for significant periods.
  • A dividend is paid twice yearly, and the current yield is 2.65%

Sources:London Stock Exchange,Numis,Winterflood,Trustnet.



Full fourth quarterly report will be available in January and suggested portfolio strategy/individual recommendations are available. Ideas for a ten stock FTSE portfolio, new model pooled fund portfolios (cautious, balanced adventurous, income), 30 stock income lists, hedging ideas and a list of shorter term low risk/ high risk ideas can also be purchased, as well as bespoke portfolio construction/restructuring. I expect more clients to consider switching some final salary pots to SIPP over coming quarters, as transfer values start to slip (partially in line with rising gilt yields) and can work with you providing bespoke portfolios according to client needs.


All stock recommendations and comments are the opinion of writer.

Investors should be cautious about all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.

All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is not indicative of future price action.

You should be aware of the risks involved in stock investing, and you use the material contained herein at your own risk

The author may have historic or prospective positions in securities mentioned in the report.

 The material on this website are provided for information purpose only.

Please contact Ken, (kenbaksh@btopenworld.com) for further information

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