Full Report - Alliance Trust

17
Electronics and Engineering
This sector also has a high share of cyclical businesses. Many are very
well-run companies, with good industrial positions and attractive
yields. With these attributes in mind we increased our holdings in
Sandvik, Kidde and Bodycote. The bearings industry is also
interesting, as it is experiencing consolidation, improved pricing and
a more rational approach to capacity additions. This led us to
purchase a holding in the Swedish manufacturer, SKF.
We added to the steel processor, Worthington Industries, a company
not exposed to the legacy issues dogging steel manufacturing. It is
modestly valued, has an above average yield, and a long track record
of paying increased dividends.
Intense competition caused us to dispose of Sony and to redeploy the
proceeds into the precision lighting company Ushio and the global
air-conditioning manufacturer Daikin Industries.
£m
Canon 11.4
General Electric 8.9
Keyence 5.4
Sandvik 4.8
Renishaw 4.7
Hoya 4.7
Spirax-Sarco Engineering 4.3
Kidde 3.9
Illinois Tool Works 3.5
SKF 3.5
Bodycote 3.1
Worthington Industries 2.9
Grainger 2.6
Matsushita Electric 2.3
Ushio 2.2
Emerson Electric 2.1
Daikin Industries 1.7
Mabuchi 1.6
York International 1.5
Other Holdings (6) 5.0
Total 80.1
Information Technology
£m
The backdrop improved after three extremely challenging years with
demand for technology products increasing and share prices
rebounding. New digital devices in the consumer sector sold well in
both emerging and mature economies, and initial signs of increased
business investment offer some encouragement for the outlook.
It was also encouraging to note a better trend in the alignment of
shareholders’ versus managers’ interests. Microsoft’s initiation of
dividend payments and the abandonment of stock options are
prominent examples. Corporate activity increased as companies aim
for size and for new markets but over-capacity in the important semiconductor
and telecom equipment segments remains to be addressed.
In the US, we reduced Intel and Dell due to valuation concerns and
used the proceeds to increase software investments that benefit from
higher levels of corporate expenditure. Additions included Oracle and
Microsoft and a new holding in Check Point Software which provides
security products to businesses around the world.
Microsoft 11.6
Cisco Systems 7.4
Intel 6.9
First Data 5.9
Sage 5.3
Nokia 4.9
Motorola 3.6
Texas Instruments 3.2
SAP AG 3.2
Samsung Electronics 2.6
Oracle 2.4
Flextronics 2.2
Jabil Circuit 2.1
Dell 2.0
Analog Devices 1.8
Thomson 1.6
Other Holdings (11) 8.1
Total 74.8