Liontrust's Inglis-Jones shorts defensive stocks

LONDON (Reuters) - Many so-called defensive stocks look expensive and have the potential to disappoint investors, says Liontrust fund manager James Inglis-Jones, who has added to short positions in areas like healthcare and tobacco.

Inglis-Jones, who co-manages the $110 million (39.3 million pounds) European Long/Short fund with Gary West and who recently took over the 416 million-pound First Income fund with West after the departure of star manager Jeremy Lang, said such stocks were "an interesting opportunity" for short-selling.

Shorting means betting on a lower price for a security in the future.

"There's lots of stocks in our portfolio that you'd think of as being defensive that we are actually short," he told Reuters in a recent interview.

"Investors perceive them as a real safe haven ... They can be very expensive -- investors have high ... expectations."

He added: "When the company delivers a disappointment the payoff can be pretty good."

Sectors traditionally perceived by investors as being more defensive and less sensitive to changes in economic activity have so far held up better during the current downturn.

For example the DJ Stoxx Healthcare sector is down 13 percent over the past year while the DJ Stoxx 50 has fallen 34 percent.

Inglis-Jones said the recent addition of more shorts to the Long/Short Equity fund had taken the fund's net market exposure close to zero. He declined to name stocks he is shorting.

However, he is more positive on the technology sector, where the fund has a large net long position.

"Technology companies can be highly cash generative and it's not being recognised by investors -- investors have low expectations for them," he said.

The fund's largest long position is telecoms testing firm Spirent, which earlier this month said trading since the start of the year had been slightly ahead of expectations.

London-based Liontrust Asset Management had 1.9 billion pounds in funds under management at March 18.

(Editing by Rupert Winchester)

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