CSAM's Ashby wary of banks; buys mid-, small-caps

By Laurence Fletcher

LONDON (Reuters) - Credit Suisse Asset Management's co-head of UK equities Graham Ashby has bought attractively-valued mid and small-cap stocks during the recent sell-off, but remains wary of the troubled banking sector.

"We are concerned about the strength of balance sheets in the banking sector," he said.

But Ashby said non-bank corporates are in extremely good shape. "We are finding some really interestingly valued companies, particularly in the mid- and small-cap space," Ashby, who joined Credit Suisse (CSGN.VX) last month from Sarasin Chiswell, told Reuters at a briefing on Wednesday.

"They are making decent returns yet are down 20-30 percent for no real change in their longer-term prospects," said Ashby who is well known for his equity income investment focus.

Ashby's comments come after a tough time for mid and small-caps. Over the past six months the FTSE Small-Cap .FTSC has fallen 18.6 percent while the FTSE Mid 250 .FTMC is down 15.2 percent, compared with a 6.5 percent drop in the large-cap FTSE 100 .FTSE index.

Ashby has built a position in Speedy Hire (SDY.L), Britain's biggest tool hire company, which on Wednesday met expectations with a 17 percent rise in first-half profit and forecast further progress in its second half.

"It's come down from 12 pounds to 9 pounds, yet is still trading extremely well. (People) are worried about its exposure to the housing market, but are not recognising the structural growth," Ashby said.

He said he had bought into engineering group Bodycote International (BOY.L), which has fallen from more than 300 pence last month, at around 220 pence per share recently. Earlier this year Bodycote rejected a 1.1 billion-pound takeover proposal from Swiss peer Sulzer AG (SUN.S), which last month said it did not rule out a renewed bid.