UK Blue Chip Laggards Among Top Bets for Fund Manager Invesco

(Bloomberg) — BP Plc, Prudential Plc and Centrica Plc are among the 25 worst-performing UK blue chips this year, though for Invesco Asset Management fund manager Martin Walker, their reduced valuations present opportunity.

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The stocks all feature in the 10 biggest holdings of the £1.5 billion ($1.9 billion) Invesco UK Opportunities Fund, which has outperformed almost three-quarters of peers in 2024.

Their valuations are looking attractive, according to Walker. Oil major BP trades at a multiple of about 7 times price to 12-month blended forward earnings, cheaper than the FTSE 100’s valuation of around 12 times. Shell, Prudential and Centrica all trade on around eight times, according to data compiled by Bloomberg.

“I’m not here to be a cheerleader for the investment ideas I have,” Walker said in a telephone interview. “I’m there for one reason, and one reason only: to produce returns.”

Insurer Prudential has fallen 28% this year, weighed down by the weakness of its key markets of mainland China and Hong Kong, where it does the vast majority of its business. Energy supplier Centrica has slipped 13%, not helped by the broad underperformance of UK assets and utility stocks. The decline comes after its shares had gained at least 35% for three straight years.

Meanwhile, Walker says oil majors BP and Shell Plc, which make up some of his biggest positions, are also undervalued with oil trading in a $60 to $80 range. Energy shares have struggled as slowing global growth has hit demand for fossil fuels, while tensions in the Middle East have fueled volatility in the oil price.

Value investing is a strategy where fund managers try to identify stocks trading below what they’re worth and betting that they will eventually outperform the market. This style of investing has lost out amid the popularity of growth stocks, especially given the large gains seen across US technology names, and the prevalence of passive funds.

Still, Walker doesn’t get too attached to his holdings. He recently sold his position in Next Plc, whose shares have gained 17% this year, in favor of Associated British Foods Plc, which has struggled ever since a warning in September of weak sales growth at its Primark budget clothes chain and an underwhelming outlook for its sugar business.

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