While there were no changes to personal Isa allowances or dividend allowances in the Budget, some of the chancellor’s spending measures could provide investment opportunities focused on specific sectors of the economy.
Some funds and trusts have the potential to benefit from the housing stimulus, while others could gain from the aim to make the UK a leader in digital technologies.
James Yardley, senior research analyst at FundCalibre, says: ‘For me there are quite a few positives in terms of both technology and housing spend. Looking at housing first, you do have to factor in that housebuilders have had an incredibly strong run over the past few years and are arguably quite expensive now, particularly when the economy isn't as strong as it could be.
‘However, the removal of stamp duty for first time buyers (up to £300,000), the determination to make more land available for housing, the speeding up of the planning process and the commitment to build more houses could collectively give the sector and those companies linked to it a further boost.’
On the topic of boosting technology, artificial intelligence (AI), 5G and full fibre broadband, he adds there are exciting opportunities. ‘Britain is starting from a great base and this support should help fund smaller businesses. Technology managers we speak to are very exciting about AI in particular.’
Adrian Lowcock, investment director at Architas, adds that ‘the investment into technology in the UK should give a boost to the country’s growing technology sector, which is primarily full of smaller companies.’
Here are six funds that are likely to benefit from the chancellor’s plans:
1. Woodford Equity Income
Yardley picks Neil Woodford’s popular fund, which has holdings in housebuilders Taylor Wimpey and Barratt Developments, as well as Purplebricks, the online estate agent that could benefit from the stamp duty exemption announced for first-time buyers. ‘The manager also invests in lots of small tech start-ups and broadband company CityFibre.’
2. L&G UK Alpha Trust
Next, Yardley chooses this fund with a holding in Seeing Machines, which makes intelligent sensory algorithms for machine learning. ‘It's being used to monitor drivers and increase safety, as well as in the move towards driverless cars, because it helps the machine to make instant decisions based on what is happening inside and outside the car.’
3. Smith & Williamson Artificial Intelligence
‘This fund was launched relatively recently, hoping to tap into the opportunities created by the development of AI,’ says Yardley. It holds overseas stock Nvidia, a company with a background in gaming that has moved into automotives as a new business area. ‘It is currently one of the most strategically important component companies in the AI world.’
4. Franklin UK Smaller Companies
Lowcock commends this fund whose managers, Richard Bullas and Paul Spencer, tend to take a cautious approach to investing in smaller companies. ‘The managers are willing to take a contrarian stance when market mispricing creates outstanding investment opportunities,’ he says. ‘While economic and industry drivers are important considerations, the fund is built from the bottom up, with each stock included in the portfolio on its own merit.’ The fund holds around 13 per cent in technology and 9 per cent in construction and real estate.
5. River & Mercantile Micro Cap Trust
The portfolio is mainly comprised of Aim-listed stocks but the manager, Phillip Rodrigs, can invest in companies with a market value of less than £100 million. The fund holds between 30 and 50 stocks and is not constrained by any benchmark, so doesn’t have to hold stocks in any particular sector. Rodrigs has balanced the portfolio between strongly cyclical, domestic-focused businesses and international earners. The main driver is that all the companies are in the portfolio because they have strategies that enable them to take market share. The fund has 14 per cent in technology and 5 per cent in real estate.
6. Woodford Patient Capital Trust
‘For investors looking to exploit the chancellor’s incentives for UK high tech companies, one investment to consider could be the Patient Capital Trust managed by Neil Woodford,’ says Gavin Haynes, managing director at Whitechurch Securities. He says the trust has a focus towards investing in innovative businesses that have exciting long- term growth prospects.
But on the whole Haynes is more sceptical. He says: ‘I am not convinced that the announcements in the budget are game changers that will be key drivers for stocks.’ He adds that markets showed little reaction in the immediate aftermath, and shares in housebuilders have since fallen back.
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