Ashby cuts BP in favour of BHP Billiton and Rightmove

LVAM's Graham Ashby has decreased his position in BP, predicting "stodgy" performance following a rally in the share price.

The head of UK equities, and manager of the UK Equity Income fund, has shaved off 1% from BP, bringing it to 4% of the portfolio on concerns its rally is over.

He also points out dividends have been re-instated at levels lower than before the oil spill, which caused the company much misery in summer of last year.

Ahsby says: "We stuck with the BP position going into the crisis and added to it when it reached depressed levels. The stock has rallied very strongly from the lows of £3 and is now at around £5 but we think performance will be a bit stodgy from here."

He has also reduced Imperial Tobacco and Tesco, completely removing the former from the portfolio.

"Imperial Tobacco is a reasonable business but the shares have rallied quite a bit of late and it went ex-dividend in January. We still hold British American Tobacco, which is our favoured tobacco stock."

Tesco has been reduced on concerns of competition in the food retail market and Ashby says it is "not generating much in terms of free cash flow".

He has added the proceeds of the sales to existing holdings in BHP Billiton, Rightmove and Victrex.

"BHP is one of my favourite mining companies. It is exceptionally diverse in its operations, is a low cost producer and enormously cash generative. It has a strong balance sheet and we are hoping for a decent uplift in dividend growth, which has been good in the past."

He has also added Rightmove on its dividend growth potential, as Ashby says it has seen an increase in yield of 33% per annum on average over the past three years.

"It has been in the fund for some time now and has been a real winner. It has net cash on the balance sheet and high profit margins.

"We are hoping to see another big increase in dividend growth and, with the housing market pretty depressed, we think this company can do even better when the property market improves," adds Ashby.