18 October UK Insights

UK Equity Funds: Stock Sentiment Analysis

275 Active UK Funds, AUM $141bn.

UK Stock Sentiment

Investment levels among the hundreds of stocks in the investible UK universe differ greatly. Some stocks are widely owned, others largely avoided by UK active managers, with ownership levels changing every month. We combine current and historical positioning against shorter-term manager activity to get a handle on where sentiment lies for every stock in the UK market. We highlight 8 stocks at the extreme ends of their own positioning ranges whilst also seeing significant changes in fund ownership.

The Sentiment Grid

The Sentiment Grid below is designed to visualize the interplay between current fund positioning, long-term fund positioning and shorter-term fund manager activity for all stocks in the UK active fund universe. The Y-axis shows the ‘Position Score’, a measure of current positioning in each stock compared to its own history going back to 2011 on a scale of 0-100%. It takes in to account the percentage of funds invested in each stock versus history, the average fund weight versus history and the percentage of funds overweight the benchmark versus history. The higher the number, the more heavily a stock is owned by active UK managers compared to its own history.
The X-Axis shows the ‘Momentum Score’, a measure of fund manager activity for each stock between 03/31/2022 and 09/30/2022 on a scale of 0% (maximum negative activity) to 100% (maximum positive activity). The Momentum Score takes in to account the change in the percentage of funds invested in each stock over the period, the change in average weight and the change in the percentage of funds overweight. The chart also highlights the companies at the extreme ends of each quadrant by colour, which will shall explore in more detail below.

Extreme Stocks

The tables below list the stocks in the extreme corners of each quadrant. The screening methodology is as follows:

  • High Positioning & Negative Momentum: Position Score > 80%. Momentum Score < 5%
  • Low Positioning & Negative Momentum: Position Score < 5%. Momentum Score < 5%
  • Low Positioning & Positive Momentum: Position Score < 20%. Momentum Score > 95%
  • High Positioning & Positive Momentum: Position Score > 90%. Momentum Score > 95%

Extreme Stocks

The charts below track the percentage of active funds invested in each of the top 2 stocks across the 4 categories. It’s another way to visualize how the Sentiment Grid works. For example, the top-left chart shows 3i Group and Anglo American seeing fund ownership reversing from peak levels after sustain multi-year growth. In the bottom-left chart, both Aviva plc and Vodafone Group used to be owned by over 50% and 80% of managers respectively, but have since seen ownership drop to their lowest levels in the last decade.
In the opposite case (bottom right), both Harbour Energy and Petrofac Limited are at the bottom of their historical ownership ranges but both have started to climb from the lows. Top right shows Reckitt Benckiser Group and AVEVA Group at peak ownership after sustained increases in fund ownership in recent months.  In the charts that follow we provide more detailed profiles of each of the 8 stocks at the extreme corners of our Sentiment Grid.

High Positioning, Positive Momentum: Reckitt Benckiser Group

Ownership among active UK funds hit fresh highs this month, with a record 46.18% of the 275 funds in our analysis holding a position in the stock.  Over the last 6-months, new positions from JP Morgan Sustainable Equity (+2.67%) and JP Morgan UK Dynamic (+2.62%) have driven ownership levels higher, with sizeable positions from TB Evenlode UK Income (6.55%) and Trojan UK Income Fund (6.31%) reflecting high conviction among selected managers.

In the full analysis, we provide profiles for the remaining 7 stocks highlighted above, together with a  47 page report on sector and stock positioning among active UK managers.  

If you are a fund manager or a finance professional and would like to read the full report, please fill in the form opposite.