Is there a bull market around the corner?

Is there a bull market around the corner?
The FTSE100, made of up Britain's biggest companies closed last week at an 11-week high at 4,243.

By Paul Farrow
Last Updated: 8:19AM BST 04 May 2009

The stockmarket bulls have been very quiet of late, but that might be about to change. The FTSE100, made of up Britain's biggest companies closed last week at an 11-week high at 4,243 and some fund managers are beginning to talk up a bull market.

One such bull is Anthony Bolton, who is worth listening to. Mr Bolton recently stepped down from running one of the UK's most popular unit trusts, Fidelity Special Situations. The reason for its popularity was simple. Under Bolton's stewardship the fund turned an outlay £1,000 into £147,000 over a 28 year period.

Mr Bolton says that "all the things are in place for the bear market to have ended". And "when there's a strong consensus, a very negative one, and cash positions are very high, as they are at the moment, I'd like to bet against that".

There has been evidence of a recovery already - and not just because of the performance of the FTSE100. Ten funds delivered a return of more than 20pc in April alone. The top performer, F&C Private Equity trust returned a staggering 68pc, while the second best performer, Gartmore Fledgling, climbed 39pc.

But you need to tread carefully with some of these funds. They are niche, volatile and are unlikely to be suitable investments for most people.

F&C Private Equity Trust, is a fund of funds – investing funds that invest in private equity companies.

Hamish Mair, manager of F&C Private Equity Trust, said that the entire private equity sector has bounced from the unprecedented lows of late March and is confident that it will continue its recovery.

"At those levels, the market was implying that just about every listed private equity fund had problems and a good number of them were going to go bust," Mr Mair said. "Even if we are facing a severe recession, I think the collapse of the entire capitalist system – which this scenario implies – is still fairly unlikely.''

Despite the stunning performance numbers many analysts are cautious on the F&C trusts's ability to maintain its performance. The private equity sector, as a whole, is still fragile and many companies could struggle to repay bank borrowings, they said.

Gartmore Fledgling invests in the smallest companies in the FTSE All-Share – typically companies that have fallen from grace. Gervais Williams, manager of Gartmore Fledgling remains upbeat and said: "It is an astonishing portfolio of unloved, cheap companies with high yields."

The Gartmore fund holds JJB Sports, for example. Its share price was about 3p but it is now trading at 23p after it was announced its landlords and creditors had voted for a company voluntary agreement (CVA) that could secure the company's future. It also holds Pendragon, the car dealer, which has seen its share price rise from 2p to 14p in recent weeks.

Nick Sketch, an investment director at Rensburg Sheppards, the investment management company, is confident that stock markets will continue to rise and that they will be higher by the end of the year. "I do not know any of my colleagues who do not believe that markets will not be higher in two years either," he added.

Mr Sketch says the time to buy shares are when they are cheap (as they are now), but warns that it may not be an easy ride as it 'will not work out every time. "There are certain to be some hiccups along the way because of the economic uncertainty. They will be write-downs and increasing unemployment," Mr Sketch added.

Among his favourite funds for those investors in it for the long-term are SVM Global and Impax Environmental Trust (which invests in wind farms, water recycling plants and solar energy companies).

The SVM fund is a diversified fund investing in just about every asset from equities, to property to hedge funds – and has a bias towards emerging markets at the moment. "Its two fund managers have a good long-term track record. They are more cynical than most managers, which we also like," said Mr Sketch."The Impax fund has risen by 50pc over the past five years."

Steve Forbes, managing director at Alan Steel Asset Management is convinced that we are at the start of a bull market.

"Many people are doubting that the recovery in share prices is the start of the bull run – and we take that as a huge positive because the last thing we want is a consensus. The markets are shrugging off bad news, while people have few places left to put their money. Returns on cash are so poor that shares are looking an attractive alternative."

Forbes recommends overseas equity income funds because he believes that high yielding shares will do well and suggests M&G Global Dividend is worth a look. "We also like Psigma Equity Income, managed by Bill Mott, for those wanting a UK fund," he added.

But not everyone is confident shares will continue to go up and up.

Mark Dampier at Hargreaves Lansdown is unconvinced that stock markets have seen the worse. "I wouldn't rush to buy shares right now," he said. "There's plenty of talk of green shoots of recovery but the trouble is I'm not convinced there are any roots."

However, he continues to invest on the dips and says that if investors are in it for the long-term, then emerging market funds are a decent place to be. He cites Aberdeen Emerging Markets, managed by Hugh Young and JM Finn Global Opportunities, as among his favourites.

Mr Dampier will also be investing his own money in a fund launched today – the Artemis Strategic Assets managed by former 1990s star fund manager, William Littlewood.

The Artemis fund will offer a multi-asset mix, investing in equities, bonds, commodities and currencies in long and short positions, as well as cash. The fund's objective is to beat cash and the FTSE All-Share index over a three year cycle.

Mr Littlewood was a hugely popular fund manager in the 1990s until he stunned the investment fraternity when he walked away from Jupiter in 2000 suffering from burnout. His popular £1.6bn Jupiter Income Trust had returned 607pc over the previous nine years versus the average income fund which returned 270pc.

But Mr Littlewood returns to the fray in a cautious mood. He told the Telegraph: "If I am right in saying this is not an ordinary recession then investors in the short run need to be careful about equities, particularly cyclical ones. To me we are in a binary world where it is deflation today and inflation tomorrow. Unfortunately as with all investments, timing is difficult. While we stay in deflationary times shares are likely to disappoint, and a fall below the stock market lows in March should not be ruled out."

http://www.telegraph.co.uk/finance/personalfinance/investing/5271431/Is-there-a-bull-market-around-the-corner.html