macromust the stronger the disparity between defensive and cyclicals, the greater upside we can expect,’ said Schupp

Fidecum's Schupp holds onto cyclicals despite performance lag

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by Emily Blewett on Oct 16, 2012 at 15:13

Top contrarian manager Hans-Peter Schupp has bolstered his allocation to financials and cyclical stocks despite this exposure causing him to underperform as he believes company earnings will not mirror growth forecasts.
The founder of German boutique Fidecum runs the Contrarian Value fund and in the last eighteen months has lost 18.7% when its benchmark FTSE World Europe ex UK TR index lost 2.3%.
‘It’s a re-run of when we launched the fund in 2008 at the time of the Lehman crisis,’ Schupp told Citywire Global on Tuesday.
‘Back then the fund’s performance lagged badly and we then saw a 40% outperformance from the trough. We just had to wait it out and add to positions which had seen worst underperformance.’
The IMF last week cut its 2013 growth forecast for China, India and Brazil, countries that are increasingly eyed as key consumer markets. Yet this will have little impact on the performance on European stocks that are currently undervalued, according to Eurostars A-rated Schupp.
'Economic growth and the return of individual stocks are not the same thing,’ said Schupp, adding that he was comfortable with the fund's position which is always fully invested.
'We can't understand the rationality behind the underperformance of European equities.'
Over the summer, Schupp changed just over 6% of the fund's exposure to reduce holdings in Sanofi, Philips and Deutsche Post.
He then increased its exposure to stocks that are positioned to do well in a steady growth environment and bought German steel distributer Klöckner, the Italian provider for steel manufacturing parts Danieli and French automotive components manufacturer Valeo.
‘We have increased stocks that to other investors look unattractive because at some point we are going to see change. Then the stronger the disparity between defensive and cyclicals, the greater upside we can expect,’ said Schupp.
The fund, with nearly €2 billion in assets, currently has 42% exposure to France, 25% in Germany and nearly 10% in Italy.
The French car manufacturer Renault S.A. currently makes up 8.8% of the fund's exposure. Other stocks in the top ten holdings include AXA SA, Royal Dutch Shell PLC, Daimler AG, Credit Agricole SA and Allianz SE.