Five out-of-favour opportunities

After a strong run, there are several concerns about the direction of markets. Yet Mileen Rash of Henderson UK Capital Growth Fund still believes there are opportunities to make good returns around. Here are five of his favourite contrarian plays.

A professional investor tells MoneyWeek where he'd put his money now. This week: Mileen Rash, fund manager, Henderson UK Capital Growth fund: After a strong run, there are several concerns about the direction of markets. In the UK, rising inflation caused an unexpected interest-rate rise in January, with further hikes expected later this year. In the US, weakness in housing and sub-prime lending is likely to have a dampening effect on the economy. Yet despite these headwinds, there are still opportunities to make good returns. I take a contrarian approach and look for stocks that are heavily out of favour, as this is usually where one can find the most upside. I look for mid- or large-cap stocks with a good business model that generate cash and are attractively valued.

One such stock is plant-hire group Ashtead (AHT). The shares have been shunned because of their exposure to US housing; however, the firm is exposed to the non-residential market, which is showing none of the weakness of the residential. Industry consolidation should also mean a less-competitive pricing environment in the future. The valuation is attractive, too: the shares trade on a single-digit p/e ratio and offer a double-digit free cash-flow yield.

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