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Top of the stocks

30 April 2021

4 minute read

We take a look at some of the stocks that are at the top of fund managers' holdings and why they might prove to be successful long-term investments.

The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

What you’ll learn:

  • Why fund managers are investing in certain companies.
  • Why looking at a funds asset holdings can give vital insight.
  • What stocks are proving to be popular.

Scanning a fund’s top 10 largest holdings can be quite telling... as can be the changes in allocation and ‘ranking’ within the list. You can take a look at a fund’s top 10 holdings on the ‘analysis’ tab of the product factsheet page online.

The size of a holding in a company is reflective of the conviction that the fund manager has in that company. So, a high weighting relative to other companies in the fund will usually mean that the fund manager has a very positive outlook on the company’s future.

These top stocks represent the best ideas that have been whittled down from a choice of hundreds, if not thousands of companies. While the ‘top 10’ is an arbitrary number, these holdings can offer an interesting snapshot of the best thinking from some of the sharpest minds in the industry, and the top stock can act as a good representative of the type of companies that the fund manager looks for.

So, how does a fund manager go about selecting stocks?

In an efficient market, where share prices quickly adjust to new information, active managers seek to identify the ones that will rise in value faster than the wider market.

Therefore, in such an environment, fund managers and their teams of analysts are challenged to delve deep into these companies’ financial records, evaluate their market, their competition, their supply chain, client base, even the regulations they’re governed by in order to glean an insight that may not yet be apparent to the rest of the market.

As you’d expect, some managers are better at doing this consistently well than others. To put this into context, let’s look at a few of the equity funds on the Barclays Funds List , which invest overseas, their largest stock positions, and some of the reasons perhaps why these companies sit atop the fund’s list of holdings.

First we have DSV Panalpina

As you drive along the motorway, count how many Eddie Stobart trucks you see. They seem to be everywhere. In fact, there are 2,7001 of the trucks pounding the roads of Europe. But that pales in comparison to DSV, who have over 20,0002 of their instantly recognisable dark blue trucks streaming across the continent’s roads. Since the Danish company was founded in the 1970s it has grown rapidly, and is today a world leader in road, air and sea transportation.

What has made DSV the success it is today? Over the years, DSV has been on a shopping spree, buying up competitors and, as a result, gaining a larger share of the transportation/logistics market. And each time the company swallows a new business, the cost savings and synergies mean the combined business maintains its profit margins. As a result, the share price has risen strongly.

More recently, DSV has continued to perform well, as the global pandemic has placed pressures on the global transportation network. A lot of goods are transported around the world in what is known as ‘belly freight’. This is where goods are transported in the lower deck of a passenger aircraft. Many airlines combine cargo transportation with passenger traffic to reach a better occupancy rate of the space available on a flight. However, whilst passenger travel restrictions have resulted in planes sitting idle all across the world, freight traffic has continued, as demand for medical supplies, industrial parts, and consumer goods has remained strong. The lack of such space in passenger planes has meant demand for dedicated freight planes has soared, and with it the price of such transportation. DSV has benefited from this surge in demand, as transportation costs have risen.

DSV Panalpina is one of the largest companies in the BlackRock European Dynamic Fund.

Next up we have Nintendo

The 130-year history of Nintendo stretches right back to 1889, when the company was producing brightly coloured playing cards. It was the uniqueness of these hand-made colourful cards that was key to the success of Nintendo. And today, it is the uniqueness of the games consoles that sets Nintendo aside from its competitors.

Over the last few decades, Nintendo has established a number of strong brands such as Mario and Donkey Kong, which are as popular and successful today as they have ever been. In addition, Nintendo has been creative in launching new and innovative games and consoles, whether that’s convincing us all to walk the streets hunting for Pokémon Go characters, or interacting with our TV through karaoke or home fitness programmes.

It’s a company that stands out against its competitors, because a lot of the activities and games it produces are aimed towards families and family interaction in the living room, rather than the stereotypical online gamers tucked away in a darkened bedroom. And it’s for these reasons that the company continues to find success, and why its share price has delivered for investors.

Nintendo is one of the largest companies in the Janus Henderson Global Sustainable Equity Fund.

Finally, there’s The Hut Group

A UK company that you have probably never heard of, The Hut Group has been one of the country’s greatest success stories of the last 10 years. Founded in 2004 to sell CDs on the internet, The Hut Group is today one of the world’s leading online retailers for health and beauty products. Well-known brands such as MyProtein, lookfantastic.com, and Glossybox are part of a portfolio of brands that are sold on over 160 websites across 140 markets3.

But it’s not just the brands and the products that make The Hut Group such an interesting company to fund managers. Behind the scenes is cutting edge technology that’s being used by some of the largest brands in the world, including Honda, Nestle, and Johnson & Johnson. This technology combines website design, marketing, translation services, online payment, customer services and delivery to the buyer. To companies like these, it’s a rapid and cost-effective way of making the shift to online selling. For this reason, The Hut Group is seen by many investors as a way to participate in the growth in online shopping, but without making a bet on which individual companies will sell more of their products.

The Hut Group is one of the largest holdings in the Jupiter UK Mid Cap Fund.

While these companies provide interesting food for investment thought, they are just a few examples of the kind of stocks that active management can invest in to try to deliver above market returns. Our references to these companies are not recommendations to buy them. We don’t offer personal investment advice. If you’re unsure seek independent advice.

Here at Barclays we aim to identify the best managers that are able to consistently identify such opportunities over the long term, and compile them in a balanced and diversified portfolio accessible to retail investors. You should nevertheless appreciate that it is not possible to be certain which managers or companies will perform the best in the future and all investments can fall in value as well as rise; you may get back less than you invest.

[Note: all stock positions and data are at time of writing (04/21) and maybe subject to change.]

Where to invest

To diversify your investment, you may like to consider our own Barclays Ready-made Investments (RMI). The RMI are just one example of a range of diversified funds which allow you to select the level of risk you are most comfortable with. These multi-asset funds invest in passive funds across a range of asset classes and regions, offering a globally diversified one-stop solution for investors. Ready-made Investments are not the only funds that we offer and they won’t be appropriate for everyone.

These are our current opinions but the future, as ever, is uncertain and outcomes may differ. Past performance of the fund and its manager are not a reliable indicator of their future performance.

We don’t offer personal investment advice so if you’re unsure you should seek that independently.

Funds are designed for the long term so you should only consider them if you can stay invested for at least five years.

Plan & Invest is a new service which creates and manages a personalised Investment Plan just for you. Whether your long-term goal is your child’s university education, retirement or just building a nest egg, all you have to do is tell us a bit about yourself and then, if your application is successful and you’re ready to invest, let our experts select and manage your investments (minimum investment is £5000).

Read the Assessment of Value report [PDF, 683KB] for funds run by Barclays.

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