Star man backs TMTs

'NEW economy' stocks are firmly back on the agenda for star fund manager Patrick Evershed. The veteran stock-picker‘s top holdings include media company BSkyB, telecoms operator Cable & Wireless and a selection of smaller technology stocks.

His New Star Select Opportunities fund has returned 51% in the past year, ranking it fourth out of 344 funds in Standard & Poor‘s UK equity sector. The FTSE 100 has only risen 8% over that time.

An 8% bounce back in BSkyB shares in the last month has helped. Evershed has long been a backer of the company but he dramatically increased his stake in recent weeks. It is now the second largest stock in the portfolio.

Evershed has very publicly backed James Murdoch's controversial appointment as chief executive. It was feared major shareholders, banding around accusations of nepotism, might block the move and that depressed the shares in September and October.

Evershed wasn‘t fazed. 'Rupert Murdoch is a pretty ruthless guy,‘ he says. 'He wouldn‘t put anyone in to run the company if they couldn't do the job.'

Evershed says Sky has seen off rivals and dominates satellite television with 7m subscribers. This, he believes, will feed through to growing profits and might even make a dividend payment likely next year.

The second biggest holding is Cable & Wireless. The stock has leapt nearly three-fold to around 135p so far this year. 'It was a classic case of bringing in new management who were able to turn things around,' says Evershed.

The shares, which once traded at nearly 1500p, slumped as investors feared the company had expanded its telecoms cable infrastructure too fast. But this year's revival has been driven, in part, by the board's radical restructuring plan.

Operations have been scaled back in the US and costs have been cut in the UK and in the firm‘s other main markets, such as the Caribbean. Evershed is particularly impressed with the firm‘s new technology that allows banks to transfer money quicker. He says seven major banks have already signed up which should encourage others to follow suit.

'Over the next three or four years the shares have the potential to double,' he adds.

Lloyd's of London insurers enjoyed a strong rally after 11 September. Some insurers had to make large pay-outs, which hit all insurance stocks. But the industry as whole benefited, as companies were subsequently able to charge higher premiums.

Evershed has heavily backed

these niche insurers for more than a year but whereas several other fund managers have sold out, Evershed continues to hold. His biggest plays are Amlin, Hardy's Underwriting, Wellington, Cox, Atrium and Kiln. Around 10% of the fund is invested in insurers.

Other major plays include Gresham Computing, which has developed the technology for Cable & Wireless‘ bank transfer system. Since Evershed told This Is Money of his Gresham holding in May, the stock has risen from 264p to 397p – a 50% rise. He has bought more Gresham shares in the last few weeks.

He also continues to invest in Northgate Information Solutions. He believes the company will reap dividends from the computer systems it has developed for police forces and the courts.

Ramco Energy also makes the portfolio top ten. Evershed believes the UK‘s dwindling gas reserves will push up the price. He believes Ramco, which is set to bring on-stream a new field south of Ireland, will be among the biggest beneficiaries or rising gas prices.

In total, Evershed holds 200 stocks, far more than the 60 to 100 stocks that funds tend to hold. He also invests 13% of clients‘ money in Chinese firms. He says that while many Western economies are coping with large budget deficits, the world‘s most populous country will continue to enjoy a boom.

New Star wants to keep the £80m fund small to make investing easier for Evershed. It therefore applies a high charge of 5.25% up front - this can be reduced by buying through a discount broker or fund supermarket – and insists on a minimum investment of £5,000. The annual fee is a more usual 1.5%.

The fund was only launched last year but Evershed previously had an enviable track record at Rathbones where his Special Situations fund was the best-performing unit trust of 2001.

Financial advisers respect Evershed‘s past performance but warn that the fund is higher risk and should not be a core holding. Some are also waiting for him to establish a track record at New Star before putting the fund on their 'buy lists'. Adviser Bestinvest warns: 'Investors should be aware that there will be periods of underperformance due to Evershed‘s contrarian nature.'