Seneca IM’s Richard Parfect gives his views on the market outlook for 2020.
“The key lesson we will be taking away from 2019 and moving into the next year is that pessimism creates opportunity. Ultra Electronics is one such example of a previously unloved stock we hold in our portfolio. This is a company which had some issues in the past but has enjoyed a strong rebound and is up 59% YTD. They have brought in a new CEO and made a real turnaround in addressing legacy problems and adopting a new management style. They now have a strong order book and good organic revenue growth, improvements which we expect to continue well into 2020”.
“We have also heard repeated tales of the death of the retail sector, with numerous household names (Marks & Spencer, John Lewis et al) flagging stalling sales figures. We believe that, rather than dying, this sector is simply in the midst of a transformation. Traditional retail giants do not have a ‘right’ to survive, they must adapt to the online shopping revolution just like everyone else. In our opinion, location and product offering is absolutely key. One of our REIT holdings (EPIC) owns a number of retail parks which have bucked the trend so far. The NEXT at Prestatyn Retail Park in North Wales is a good example of this. The management team recently held a rent review of the NEXT store, securing an increase of around 53% that went unopposed due to the strong trading conditions there. Despite retailers like NEXT going on record to say their rents are too high, our own research has unearthed numerous retail assets which are not overpriced for rent. It takes a trained eye to spot where the opportunities are in this sector and strength of brand is not enough to please an increasingly discerning customer”.
“Once Brexit is out of the way, investors will have a much clearer landscape – but with a long overdue resurgence for value stocks to shine once again in 2020, investors will need a discerning eye to spot the real diamonds in the rough.”
The views expressed are those of Richard Parfect at the time of writing and are subject to change without notice. They are not necessarily the views of Seneca Investment Managers Limited and do not constitute investment advice. Whilst Seneca Investment Managers has used all reasonable efforts to ensure the accuracy of the information contained in this communication, we cannot guarantee the reliability, completeness or accuracy of the content. This communication provides information for professional use only and should not be relied upon by retail investors as the sole basis for investment. Seneca Investment Managers Limited (0151 906 2450) is authorised and regulated by the Financial Conduct Authority and is registered in England No. 4325961 with its registered office at Tenth Floor, Horton House, Exchange Flags, Liverpool, L2 3YL. FP19 394.