Having once again reached record highs, there have been plenty of headlines about whether the FTSE 100 could pass the 10,000 barrier in the not too distant future. At time of writing, year-to-date the blue-chip index is up over 25%* while forward PE ratios sit at 13x, just ahead of their median range**.
However, a good chunk of performance this year is attributable to a quintet of banks and a trio of defence stocks – beyond this there may well be a host of untapped opportunities in both the FTSE 100 and the wider UK market.
This week’s fund has a history of contrarianism, targeting share prices at the whim of poor sentiment – which is rife in the UK at the moment.
“What we are looking for is traditional shareholders who are puking up certain stocks. People that are hard and fast growth investors with great quality credentials – that have come to the end of their tether with a stock – and that creates a lot of dislocation.”
That’s according to Jeremy Smith, manager of the CT UK Equity Income fund. A bottom-up, high conviction and contrarian portfolio of around 45 names – Jeremy uses a disciplined process of identifying stocks across the UK economy where the value has dislocated from its long-term trading range. He looks for unloved companies with the ability to sustainably grow their dividends. Jeremy believes in being patient and not over-trading. He embraces the ‘think active, act lazy’ philosophy, which has been a consistent feature of this fund. The result is a portfolio with roughly two or three names added a year. Jeremy aptly puts it as “running the winners and nursing the losers” with moves occurring if there is a structural change to the investment case.
Jeremy, who is also co-head of UK equities at Columbia Threadneedle, took over as manager in November 2022 from Richard Colwell, with the only major change to the process being the need to sustain a permanent yield tilt in the product. This has seen a slight shift away from quality and towards value from a style perspective. Over the past three years the fund has returned 40.6% to investors, with a yield of 3.5%***.
The gauntlet of economic ups and downs
Being a contrarian in the investment world requires patience, and the past couple of years have been a challenge in terms of positioning for the portfolio. The fund has been overweight domestic businesses (except banks) to the tune of 40%, versus 25% for its benchmark.
“That has seen us run the gauntlet of the economic ups and downs. Sentiment has been negative to many sectors – but our focus of identifying really good businesses, with the right to win in their own categories, remains strong. Tesco, M&S, Land Securities and Travis Perkins have all shown tremendous resilience and continue to do well,” adds Jeremy.
The fund now holds names Jeremy did not believe he would hold again in his career. A good example is chemical specialist Croda, which Jeremy says has been hammered in recent times, citing the worst de-stocking cycle in 20 years from Covid.
He says: “Croda is just coming out of that now and at the same time they’ve had to pull off a huge strategic push into Asia to build a manufacturing footprint to help customers – who are pharma and health & beauty businesses in Asia – so they need to be where their customers are.”
Other examples include the likes of Burberry, Smith & Nephew and Diageo.
When asked which stock best highlights his process, Jeremy does not hesitate to cite GlaxoSmithKline, pointing to the excellent performance of the outgoing chief executive and the track record of the new team, who turned around the fortunes of both Roche and AstraZeneca. He says they have £30bn of firepower for business development and organic expansion, however, the market has “hated it for a long time, having trodden on lots of landmines which have affected sentiment”. He says the business has 15 drugs in the pipeline and the management team are confident these will reverse existing patent expirations.
In addition to around 70% in the FTSE 100, the fund also has 30% in the battered and beleaguered FTSE 250. Jeremy is quick to point to the disparity in performance between the FTSE 100 and the more domestic-orientated index, adding the differential in absolute performance is at historical highs, a period which reminds him of the situation prior to the news of the Covid vaccine.
“When the vaccine came in we had very rapid mean reversion in share prices in a basket of stocks correlated around the same event. I’m not sure what that event will be this time but we are in the realm of stretching reality too far in terms of that price differential,” he says.
Jeremy says this is a fertile market for active managers with plenty of opportunities available to him. Ultimately, he says the portfolio is already full of undervalued shares, meaning it is all about opportunity cost.
He says: “We’ve got a portfolio of ideas bought at different interval points and some of those ideas have broken through and become successful; while others are just starting that journey. But we are super excited in the companies we invest in and own. Our focus on total return – which is a combination of that capital and yield premium to market – should give us some insulation in volatile times, because two thirds of those returns will come from income.”
This fund has a patient, high-conviction approach and has been extremely consistent over many years. Jeremy is an experienced manager with a proven track record, which gives us confidence in his ability to find the unloved companies of today which could be the winners of tomorrow.
*Source: FE Analytics, total returns in pounds sterling for the FTSE 100, 31 December 2024 to 12 November 2025
**Source: JPMorgan Asset Management
***Source: FE fundinfo, at 12 November 2025
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Juliet’s views are her own and do not constitute financial advice.
Main image: jason-leung-nBy2abg-6UM-unsplash
