M&G’s Kelly Bets on Former Highflyers Like Novo to Trounce Peers

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessM&G's Kelly Bets on Former Highflyers Like Novo to Trounce Peers(Bloomberg) -- M&G Plc’s Shane Kelly is beating 91% of European-focused equity fund managers by snapping up former investor darlings he avoided for years because their valuations were too high, including Novo Nordisk A/S.Author of the article:Margaryta Kirakosian and Henry Ren You can save this article by registering for free here. Or sign-in if you have an account.v(x3x23ipde[39]jrs7(wkpq_media_dl_1.png Bloomberg(Bloomberg) — M&G Plc’s Shane Kelly is beating 91% of European-focused equity fund managers by snapping up former investor darlings he avoided for years because their valuations were too high, including Novo Nordisk A/S.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe deputy fund manager of the firm’s €8 billion ($9.1 billion) European Strategic Value fund has in recent months added names such as Diageo Plc and Heineken NV that are languishing well below their highs of the past few years. The same holds true for healthcare picks like Novo and Sanofi SA.Unlike typical value funds that gravitate mainly toward financials and cyclical sectors, Kelly searches within the cheapest quartile of every industry to avoid concentration. He looks for companies with strong fundamentals that he believes the market is unduly pessimistic about. Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try again“We’re starting to see names that probably two or three years ago we wouldn’t expect to be owning,” he said. “Are they fundamentally sound? Are they not a value trap? Then we’re comfortable owning them.”Following strong performances in Europe’s energy and banking sectors this year, active managers are looking out for pockets of value elsewhere. Kelly, however, is sector-agnostic and avoids getting drawn into macro trends.His fund has returned 24% over the past year, placing the portfolio’s performance in the top 10% of European equity funds. The benchmark, MSCI Inc.’s European Net Return Index, gained 20%. The fund has beaten 98% of peers over a five-year period.The bulk of his portfolio still consists of bread-and-butter value names. These include financial stocks such as Banco Bilbao Vizcaya Argentaria SA and Erste Group Bank SA. He also is overweight on ArcelorMittal SA, a stock that once was cyclically depressed but now delivers strong returns.Kelly funded some purchases with profits taken in banking and defense shares. In the case of Diageo, he believes management has a range of options to revive growth for a stock that has fallen 17% from this year’s peak and trades at 13 times forward price-to-earnings, compared to a five-year average of 19.Kelly isn’t convinced that Diageo, the owner of alcoholic brands such as Smirnoff and Guinness, will suffer from healthy-living trends among younger consumers.“When I talk to friends and family that have teenage children, I don’t get the sense that it changed quite significantly,” he said.Kelly followed a similar logic for healthcare, buying companies that have been hit by rising competition, patent cliffs and slower growth. Novo, the Danish obesity drugs pioneer, is down 20% from its peak in January and trades at 15 times forward price-to-earnings, below its five-year average of 26. He believes the market is underestimating the strength of the franchise and the industry’s long term-growth potential as treatments become more affordable.In the case of ArcelorMittal, Kelly argues that the stock has been punished due to weakness in Europe’s steel industry, even though the company has global operations. Kelly said policymakers are starting to recognize the strategic importance of domestic steel production, which should improve industry dynamics and allow space for the stock to move higher. “Last year, you have seen that with the German stimulus,” Kelly said. “What you get with that process is stocks that are often sitting there waiting for a positive surprise.”This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.