279. Why “sin stocks” aren’t inherently bad

We touch on the UK stock market’s up and downs with Alessandro Dicorrado, co-manager of the Ninety One UK Special Situations fund, who questions whether recent performance has been driven by sentiment or the overall challenges faced by UK companies today. Alessandro emphasises the team's focus on contrarian investing as we look closer at the fund’s composition. 

This interview also covers “sin stocks” such as tobacco and oil companies, with Alessandro arguing that these industries are in transition towards sustainability and decarbonisation, rather than being inherently unethical. Alessandro gives an overview as to how the team approaches these companies through engagement and highlights holdings working on decarbonisation and electrification. 

What’s covered in this episode: 

• What factors have influenced the UK stock market’s up and downs 
• The types of companies held in this fund
• The manager’s valuation approach to stock selection
• Why “sin stocks” is an unfair label
• How these so-called “sin stocks” are transitioning
• Looking for companies with strong ESG strategies in place
• Why Rolls-Royce is well positioned for the future
• How Rolls-Royce is working towards decarbonisation
• The transition towards electrification
• Why the manager is bullish on the auto suppliers sector
• How the manager monitors long-term themes
• Being patient and waiting for opportunities in more popular themes
• Insurance as an artificial intelligence investment

More about the fund:

The investment process for Ninety One UK Special Situations fund is best described as contrarian, meaning the team seeks to exploit the ‘herd’ mentality of capital markets by investing in UK companies that are both unloved and undervalued. The team begins its search for new ideas by looking at shares whose prices have fallen substantially from their peak – or which have gone nowhere for some time. The managers will then undertake detailed fundamental analysis, sifting out the genuinely troubled businesses from those which have been misunderstood by the market.

Learn more on fundcalibre.com

Please remember, we’ve been discussing individual companies to bring investing to life for you. It’s not a recommendation to buy or sell. The fund may or may not still hold these companies at the time of listening. Elite Ratings are based on FundCalibre’s research methodology and are the opinion of FundCalibre’s research team only.

Learn more on fundcalibre.com

Please remember, we’ve been discussing individual companies to bring investing to life for you. It’s not a recommendation to buy or sell. The fund may or may not still hold these companies at the time of listening. Elite Ratings are based on FundCalibre’s research methodology and are the opinion of FundCalibre’s research team only.