Aberdeen trust ditches Apple in portfolio overhaul

15 June 2012 | By Gary Jackson

The trust was recently renamed the North American Income trust and adopted an active management approach with a focus on dividend income after a change in policy was approved by shareholders last month.

Management of the £214.7m trust has moved from David McCraw, the head of specialist equity at Aberdeen, to Atkinson, the head of North American equities, and his Philadelphia-based team.

Changing the portfolio to fit the new strategy involved cutting the number of holdings from the full constituents of the S&P 500 index to just 40 stocks. During the moves, Atkinson opted not to own technology giant Apple, which was the largest holding under the trust’s previous tracker strategy.

“We think the competitive threats around Apple’s business model are growing substantially and through time there may be some margin pressure as it uses price more to sell its products. It’s tough to see it continuously come up with a new blockbuster every six months,” the manager explains.

“When holding Apple, you’re now betting on its ability to sell more and more iPads and handsets at an ever faster rate. But the environment is much more competitive than it ever has been.”

Apple is a popular holding among fund managers and is the top position in portfolios such as Cormac Weldon’s £2 billion Threadneedle American fund* and Aled Smith’s £1.1 billion M&G American fund*.

In March, Apple announced plans to start paying a dividend for the first time since 1995, after having built up cash reserves approach $100 billion (£64.5 billion). The California-based firm will pay a quarterly dividend of $2.65 per share at some point in the quarter starting July 1.

Despite avoiding the stock, Atkinson is sees the merits of Apple but is concerned about the wider business conditions.

“That’s not to say Apple is a bad company - it’s a great company,” he says. “But we think the operating environment may be tougher in the next three years than it has been in the previous three years.”

For full details of the North American Income trust’s overhauled portfolio, see Fund Strategy published on Monday (June 18).

^{* as of April 30}

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