Five fund managers’ top stock ideas
Five fund managers’ top stock ideas
We talk to five fund managers about the stocks they view as the most compelling thematic bets out there.

Stock: Xcel Energy

One-year share price: +13.8%

The Premier Miton Global Infrastructure Income strategy, managed by Citywire + rated Jim Wright, has a 3.5% allocation to US regulated utility Xcel Energy.

Wright is bullish on the stock on the grounds the equity market underestimates the potential for US regulated utilities over the next decade.

He believes Xcel Energy’s asset base will grow due to significant investments required to drive the energy transition.

Wind and solar energy are now extremely attractive alternatives to traditional fossil fuels due to the recent Inflation Reduction Act passed in the US, which extends tax-driven subsidies on renewable energy.

‘Utilities such as Xcel Energy are decommissioning coal power plants and replacing them with renewables,’ said Wright.

‘For the utilities, this means their asset base grows, as the part of the customer bill which formerly went to pay for the fuel is now capitalised by the utility.’

Over the three years to the end of July, the Global Infrastructure Income fund has returned 26.6%, outperforming the IA sector average of 22.2%.

Stock: Central Japan Railway Company

One-year share price: +7.6%

Thomas Sorensen, manager of the Nordea 1 – Global Climate and Social Impact fund, prefers Central Japan Railway Company, which he views to be a key beneficiary of the planet’s sustainability drive.

Sorensen regards Japan’s rail industry as a world leader, envisioning further positive developments in the wake of the country’s aim to reach carbon neutrality by 2050.

Central Japan Railway Company is the second-largest rail operator in the Asian powerhouse, as it generates more than 80% of its revenues from the Tokaido Shinkansen high-speed trainline, which connects major cities Tokyo and Osaka.

‘Compared to a passenger aircraft on the same route, the Shinkansen bullet train uses 88% less energy, while carbon emissions are 92% less per seat than its aviation equivalent,’ said Sorensen.

The daily airline passenger capacity between Tokyo and Osaka only holds 6.25% of the Tokaido Shinkansen capacity. For Sorensen, adopting a train-only approach could lead to a 40% reduction in carbon emissions.

Over the past year to the end of July, the Global Climate and Social Impact strategy has lost 6.3%, underperforming against a sector average of -4.0%.

Stock: Denali Therapeutics

One-year share price: - 42.3%

Citywire A-rated Linden Thomson manages the AXA Framlington Biotech strategy.

The fund manager is bullish on Denali Therapeutics, which she believes is at the forefront of research on the genetics of neurodegeneration.

Denali Therapeutics is developing several drugs to treat conditions including Parkinson’s, Motor Neurone Disease, and Alzheimer’s.

Thomson believes the company is well-funded, with partners supporting development costs for some of the programs.

Denali Therapeutics also has technology to enable brain delivery of drugs, offering a lower risk, nearer-term commercial opportunity.

‘While early stage, Denali Therapeutics is highly science-focused, and it continues to execute on clinical development, which we believe will provide a compelling investment opportunity over the long term,’ said Thomson.  

Over the past three years, her strategy has returned 29.3%, outperforming a sector average of 17.1%.

Stock: TE Connectivity

One-year share price: - 12.7%

Deirdre Cooper, the Citywire AA-rated portfolio manager who runs the Ninety One Global Environment strategy alongside AA-rated Graeme Baker, has a 4.8% allocation to connectivity and sensor solutions company TE Connectivity.

TE Connectivity offers the broadest range of technologies for electric vehicles, which have double the connector content of traditional internal combustion engines.

The company works with original equipment manufacturers across the globe to develop the next generation of vehicles.

‘TE Connectivity’s competitive advantage derives from its industry-leading position in manufacturing a broad portfolio of critical custom-engineered products,’ said Cooper.

‘We understand the company is the sole provider for many applications, which allows it to maintain pricing power.’

Over the past three years to the end of July, the Global Environment fund has returned 0.6%, outperforming a sector average of -4.0%.

Stock: Trimble

One-year share price: -32.5%

BNY Mellon Future Food fund portfolio manager Miki Behr’s top thematic stock is California-based tech company, Trimble.

Trimble is a tech solutions provider that provides precision agriculture tools for companies in the food industry.

‘Companies that contribute to greater efficiency, which can lower costs or reduce the burden of resource consumption – those are the kinds of innovators we seek out in the fund,’ said Behr.  

Trimble’s precision agricultural solutions enable greater automation and more efficient use of resources, says Behr.

Through these solutions, farmers can accurately manage nutrient application, seeding, planting, and spraying. This has benefits on reducing costs for farmers and reducing crop chemicals.

Over the past year to the end of July, the strategy has returned 5.1%, outperforming a sector average of -9.0%.

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