Manager of Calvert fund loves 'unloved' financial sector

Richard England is enamored of banks, particularly JPMorgan Chase and Wells Fargo

Feb 9, 2011 @ 4:17 pm

By Jeff Benjamin

The “unloved” financial sector is now ripe with investment opportunities, according to Richard England, manager of the $1.6 billion Calvert Equity Portfolio Ticker:(CSIEX).

Mr. England, who manages the fund along with two other portfolio managers and five analysts on a subadvisory basis at Atlanta Capital Management LLC, is currently overweight financial sector stocks.

The fund's 17.5% weighting in financial stocks compares to a 14% weighting by the benchmark S&P 500.

“The whole financial sector has been unloved for the past few years,” Mr. England said. “But banks in particular are extremely well-capitalized, and I think we're a month or two away from seeing some capital allocations, including rising dividends.”

Some of his favorite names in the financial sector include JPMorgan Chase & Co. Ticker:(JPM), and Wells Fargo & Co. Ticker:(WFC).

As a subset of the financial sector, Mr. England also likes asset management firms Franklin Resources Inc. Ticker:(BEN), and T. Rowe Price Group Inc. Ticker:(TROW).

The fund is the flagship product of Calvert Investments, a $14.7 billion socially conscious asset management firm.

Atlanta Capital, which has $9.8 billion under management, adheres to the Calvert social screens related to issues such as product safety and corporate governance.

Out of potential universe of 1,000 large-cap stocks, Mr. England said, the Calvert screens eliminate about 300 companies.

The Atlanta Capital team also starts with its own fundamental research screens related to company size, growth rate and quality of the growth, which whittles the list of potential investments down to about 350 names.

In addition to the financial sector, Mr. England is also bullish on technology stocks, which is part of a generally bullish outlook for the year.

The fourth-quarter earnings reports, he said, indicate that the S&P 500 will extend to eight consecutive quarters a string of better-than-expected earnings.

This will also mark the third consecutive quarter of better-than-expected revenues, which Mr. England said illustrates that companies are now beyond just benefiting from cost cutting.

“We're pretty optimistic on the market overall for 2011,” he said, and added that he expects 2011 earnings growth for the S&P 500 to be close to 14%.

“We think the stock market is still fairly meaningfully undervalued,” he added.

Technology is the largest weighting in the portfolio at 25.5%, compared with 17% for the S&P 500.

The driving force, which Mr. England said is already a few years old, relates to the ongoing development of server virtualization, also known as cloud computing, as well as the growing popularity of smart phones and tablet computers.

“We're still in the early innings of this second major technology sea change,” he said. “The old winners are having a harder time competing.”

In this area he sees opportunity in names such as Apple Inc. Ticker:(AAPL), Ticker:(CRM), Qualcomm Inc. Ticker:(QCOM), and VMware Inc. Ticker:(VMW).

The Calvert Equity Portfolio, which was called the Calvert Social Investment Equity Fund until Jan. 28, has gained 5.7% since the start of the year and gained 17.2% last year.

The S&P 500 has gained 5.3% year-to-date and was up 12.7% last year.

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit


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