Shares to buy, hold and sell: Richard Buxton

Richard Buxton is a well-known figure in fund management.

His reputation was secured during his time at the helm of Schroder UK Alpha Plus, which returned a top-decile 243% during his 11-year tenure - more than double the sector average and 88% more than the FTSE All-Share index.

Buxton joined Old Mutual from Schroders in 2013. However, he has managed Old Mutual UK Alpha since 2008 (originally on a third-party basis); over the five years to 1 January 2016 he has delivered a second-quartile 45%.

The fund has struggled recently because of its oil and gas holdings, but as a long-term contrarian investor, Buxton has no plans to radically change the portfolio.

Buy: Lloyds

Buxton has held UK high street bank Lloyds since 2008, when he bought in with gusto, despite a developing financial crisis during which the bank had to be rescued from collapse by the UK taxpayer.

He has held on tight since: all the way down to the low of 26p in 2012 and back up to the recent high of 90p in May 2015.

This followed a spate of good news: a reinstated dividend, better-than-expected profits and the promise of a government sale. In addition, the bank also recently passed stringent capital adequacy tests.

However, despite this good news, its share price has fallen to around 72p, leaving Buxton perplexed.

He says: "It passed the stress test. In fact, its capital generation is so strong that even when the regulator raises the bar there is no way it won't pass again, so you should see some good dividend growth over the next few years."

The manager believes lingering scepticism over the banking sector - as many firms continue to attract large fines for past behaviour - is to blame for investors avoiding Lloyds.

However, he says banks will provide a "growing percentage of the market's dividend income" in future, so investors may be wise to reconsider their positions.

Hold: Aviva

Fellow financial company Aviva is Buxton's largest holding, accounting for close to 5% of his portfolio. He says he began buying the insurer and investment manager in the autumn of 2014, following the appointment of its current chief executive, Mark Wilson.

Buxton says: "We had not invested in Aviva for years, but under executive chairman John McFarlane it changed management, sold a US business it should never have been in and plugged a large capital deficit."

All of this caused Aviva's shares to soar in value in 2014, returning close to 20% between January and November.

However, the firm acquired Friends Life in June last year, and the share price has been erratic since. Buxton says: "Shareholders didn't expect the acquisition, and there has been a good deal of scepticism. However, we think two plus two equals a lot more than four, and we are extremely confident that, following Aviva's spring results, people will begin to see the benefits in terms of both profit progression and dividend."

Sell: Taylor Wimpey

Taylor Wimpey was one of Buxton's largest holdings, but he has recently been selling down his stake. He bought into the firm in 2010 for just 25p a share. The price now hovers around 200p, and Buxton has banked an astonishing 550% profit.

This phenomenal outperformance has prompted Buxton to trim his holding from 4% to around 2.5%. He says: "The outlook for UK housebuilders is still very benign: they are the only buyers of land, as smaller builders still can't get credit.

"Land prices are gently declining, yet house prices are gently rising, so these guys are making very good margins, and I can't see anything on the horizon that will change that. But I am mindful that we have come a long way in terms of valuations."

He believes rising interest rates could become a concern for the housing market, as mortgages will become more expensive, and that government policy - currently supportive of rising house prices - may not remain so helpful.

"If, rather than a 'help to buy' scheme, the government implemented a 'help the jobbing builder get access to credit' scheme, this dynamic could shift. I'm still holding, as the outlook is still pretty benign, but I don't want to have so much in it, as you can see things might change," Buxton says.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.