Shares boom is over, says guru
ANTHONY BOLTON, one of the UK's greatest ever stock pickers, has called the end of the stock market's bull run.
Bolton, who manages Fidelity's £6.5bn Special Situations fund, has been taking more of a defensive stance in recent months in preparation for the market's downturn.
The FTSE 100 has lost around 10% of its value over the past month and has seen all its 2006 gains wiped out.
Bolton, who is due to relinquish control of half of his fund next January, said: 'Is this a correction or the end of the bull run? I think it's more likely to be the end of the bull run.
'We could see a series of small corrections and recoveries over the long term or we could see a sharper drop. However, the quicker the downturn, the smaller the consolidation will be.'
The downturn could last for months, not days, he warned.
Bolton, who also runs the Fidelity Special Values investment trust, indicated a number of tell-tale signs to support his assertion. These include investors' willingness to take higher risks; the high level of initial public offering activity - many of which are heavily oversubscribed; the length of the current bull run and the generally weak global economic environment.
Speaking to an audience at the Securities & Investment Institute, he said: 'The current bull run has gone on for three years, which is a long time. When you look at the charts of some stocks, you get the feeling that this party has to end.'
The prediction came on the same day that two high-profile IPOs in London were pulled. Spread-betting firm CMC and property group Sigma Capital said they would wait until the markets calmed before floating.
Bolton's fund has returned 26.7% to investors over the past year, but has fallen nearly 8% over the past month. He said: 'Investors are prepared to take more risks and that's always a warning sign. Then you have factors such as the situation in the Middle East and bird flu, which could have an affect on the markets.'
Bolton added: 'When money is virtually free, that's when people do silly things.'
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Bolton has been buying into more defensive shares in the pharmaceutical and media sectors, in addition to moving more of the fund into large cap companies.
He has also taken out a 'put option' on the fund, which is essentially an insurance policy that gives the owner the right, but not the obligation, to sell a specified amount of a stock at an agreed price within a set time.
The option becomes more valuable as the price of the underlying stock depreciates relative to the agreed price.
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