Franklin’s Bullas bets on pints, pies and property for recovery

Richard Bullas has added high street baker Greggs (GRG), pub group JD Wetherspoon (JDW) and property stocks to his Franklin Templeton UK Mid Cap fund, as he hunts for stocks that can grab market share post-crisis.

Citywire AA-rated Bullas, who became sole lead manager of the £1bn fund this month after Paul Spencer stepped down ahead of his retirement, said his team had bought four new holdings in the second quarter and sold none. 

He said they were looking for companies with enough ‘financing to bring them through this difficult period, opportunities for profit to recover, and for management to strengthen their position and come out [of the Covid-19 crisis] more efficient and grow and grab market share’. 

Bullas pointed to Greggs, was is reopening it sites but faces the ‘challenges of operating in this environment’ of social distancing. 

‘There is strong underlying momentum, cash on the balance sheet, and a strong record of growth and innovation, strong presence and brand awareness,’ said Bullas, adding that its ‘end-to-end control’ of the manufacturing and distribution chain meant it also had ‘cost levers to pull’. 

Bullas also bought into JD Wetherspoon’s £141m share placing last month on the back of its ‘large managed pub estate that has a strong freehold backing’. 

The manager said the chain was well placed to manage under social distancing measures as it operated large sites and 80% of its pubs had outdoor space.

‘It has also invested in technology through its ordering app and is well-placed to face the challenges in the short term,’ he said. 

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Bullas (pictured) said, like Greggs, JD Wetherspoon had a ‘strong presence in the value end of the market’ and both stocks were likely to benefit from ‘consumers trading down to cheaper alternatives’ if the economic backdrop weakened. 

Franklin UK Mid Cap has been hit hard this year, falling 26.3%, wider than the FTSE 250’s 20.8% loss. Over three and five years the fund remains ahead of both the index and peers in the Investment Association’s UK All Companies sector, however, up 1.5% and 15% respectively.

Two property sector stocks completed the team’s buys in the second quarter. Daniel Green and Marcus Tregoning have been added to the team running the fund this month, alongside Citywire A-rated Mark Hall, following Spencer’s departure.

Bullas bought LondonMetric (LMP), a special industrial and logistics real estate investment trust (Reit) that raised £120m in a share placing in May. 

Bullas said it ‘sold off heavily in the downturn and was trading on a 10% to 15% discount to net asset value’ but it is ‘really well placed in the new world’ of increased online shopping thanks to its exposure to ‘last-mile’ logistics. 

The fund bought into the share placing, which Bullas said was ‘an opportunity we would not normally see in an ordinary market’ and he is expecting LondonMetric to ‘grow and expand in the downturn’.  

The second property pick was student accommodation group Unite (UTG), which Bullas said was ‘very weak into the sell-off’ as university campuses shut down amid the spread of coronavirus. 

However, Unite believes it will be back to 90% occupancy in September for an October start and Bullas said it was now focusing on ‘domestic students not international, who will find it harder to come [to the UK] given the travel restrictions’. 

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He is expecting Unite to be ‘more normal in a year’s time’ with a return to growth thanks to its £300m equity raise last month that Bullas said would ‘fund future opportunities’ and allow it to ‘come out the other side of the pandemic’.



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