Trustnet Magazine Issue 10 September 2015 | Page 30
IN THE BACK
STOCKS
TAKING
A PUNT
A
s the Rugby World Cup touches down in the
UK in September, all eyes will be on our Home
Nations in the hope of victory. It’s difficult to say
who I am going to pledge my hard-earned fiver to: do I
stay faithful to my Welsh and Irish roots; do I go for the
most obvious choice; or do I go completely leftfield and
put my faith in an unexpected outsider in the hope of
an Ashes-style upset? The outcome of the competition
is anyone’s guess, but in the equity world we can
find stronger conviction in our selections through
careful stockpicking of companies with the strongest
underlying fundamentals. This can lead us to look either
at better-known blue-chip businesses or those expected
to be rank outsiders.
BOOKIES’ FAVOURITE: IN RUGBY,
THE FAVOURITES ARE THE ALL
BLACKS, but when it comes to
a stock-pick it’s less clear-cut as
there are many all-rounders to
choose from. One standout stock
that has performed consistently
is Compass Group. The business
has evolved under chief executive
Richard Cousins, who has focued
on cost discipline in a place where
it is delivering structural growth
and a healthy dividend. I believe
the market is focusing too much
on short-term numbers and
overlooking Compass’s longer
term opportunities in the US and,
further down the line, Europe.
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HOME NATIONS: OUR BOYS
WILL UNDOUBTEDLY BRING
their usual determination to the
tournament, and may create a few
surprises along the way. Investing
in shares with a strong domestic
focus in a UK portfolio is vital,
given the international nature of
our stock market. My pick is DFS
Furniture, a no-frills but goodquality furniture business, which
has done well since its IPO early
this year. With a cash-generative,
low capex model, it is the
dominant player in its space, and
coupled with a long-term record
of outperforming, DFS will fly the
Home Nations flag in my portfolio.
UNEXPECTED OUTSIDER: MY
PICK FOR CURVEBALL TEAM
goes to Samoa. It would be easy
to underestimate them, but
they are spectacular when on
form. Another giant currently
being overlooked is Prudential.
China’s slowdown has been felt
throughout emerging markets and
has severely hit the Pru, which
derives one-third of its operating
profits from Asia. While investors
should be mindful of this and the
risk of currency devaluations, the
outlook is positive and new chief
executive, Mike Wells, should be
able to navigate this rocky patch
and continue to deliver results.
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Gary Potter, co-head of multi-manager
at F&C Investments, reveals why he is
backing Adrian Brass’s new venture
WHAT I BOUGHT LAST
Chris Murphy, head of global income
at Aviva Investors, reveals his picks for
the Rugby World Cup and what their
equivalents would be in the UK stock
market
MAJEDIE US
EQUITY
O
ne of the latest adjustments to F&C
MM Navigator Boutiques has been
to introduce the recently launched
Majedie US Equity fund, headed up by
Adrian Brass. Brass was formerly at Fidelity
where he managed a range of segregated
and retail products, including the flagship
$8bn American fund, which was a topdecile performer throughout his tenure. He
joined Majedie in 2014 and in addition to
running the US Equity fund, he is also comanager of its global equity mandates.
The move to Majedie may on the one
hand be seen as quite a brave move for
a manager with a strong track record at
one of the larger fund groups in Europe,
but that was the appeal for us. Although
adhering to UCITS IV guidelines, there
are no formal constraints on the fund or
manager relative to a benchmark and
Brass has been allowed to develop the
fund in the way he feels is most suited to
his investment style. Majedie has built
an enviable track record, primarily in
UK equity mandates, by doing just this
– allowing its fund managers to manage
with full flexibility. In Brass it has picked
a manager who relishes this challenge.
Above all he believes in his ability and
alongside Hong Yi Chen, the dedicated
analyst, we believe the fund will match
our expectations for strong relative
performance – its track record since launch
in June last year is a most encouraging one.
Brass has three key stages to the
investment process: idea generation,
fundamental investigation, and correct
position sizing for the level of risk being
taken. One of the benefits of working
at a company such as Majedie is having
the opportunity to spend all your time
immersed in the research process,
free of potential distractions. A highly
incentivised and motivated individual in
a performance-focused environment is a
powerful cocktail for investment returns
ONE OF THE BENEFITS OF
WORKING AT A COMPANY SUCH
AS MAJEDIE IS HAVING THE
OPPORTUNITY TO SPEND ALL
YOUR TIME IMMERSED IN THE
RESEARCH PROCESS, FREE OF
POTENTIAL DISTRACTIONS
and although quite single-minded in his
process, Brass is humble enough to invite
contribution from Majedie’s other very
capable managers in helping to shape his
thoughts on global trends and corporate
developments.
Our Boutiques fund will naturally seek
out such managers and funds, which we
will back with conviction. The decision
to add the fund to our portfolio of
interesting boutique holdings was not
too difficult. Brass’s more value-sensitive
approach made sense to us after a period
of strong outperformance for growth as
an investment style and, together with a
relatively young portfolio of fresh ideas
managed by a highly capable individual, it’s
fair to say we believe our early adoption is
the start of a long holding period.
Gary Potter is co-head of multi-manager at F&C
Investments