A professional investor tells MoneyWeek where she’d put her money now. This week’s tips come from Sharon Segal, investment director at BDO Stoy Hayward Investment Management, and manager of the Fitzwilliam Growth Fund.
We are now clearly in exceptional times as the markets reels from the fallout of the sub-prime crisis. That means it’s important to find fund managers who have the experience and self-belief to capitalise on today’s difficult markets, and deliver consistent results over not just the coming months, but the coming years. The managers we like all share the same rare qualities: honesty, bravery and a disciplined investment process. In addition, all three have established reputations for being able to choose the right stocks for different investment climates. So who are our trusted stockpickers?
Derek Stuart at Artemis manages the Special Situations Fund. Stuart is a fund manager with the ability to perform in all market conditions. In general, he looks for firms in transition, or in recovery, that require re-financing or are simply out of favour with investors. His selected stocks tend, therefore, to be small or mid-caps with a bias towards growth. But this is not a rigid template – he is happy to look at value opportunities too. While Stuart’s portfolio has struggled in the last six months, relative to the wider market, we feel this is temporary. He is an exceptional stockpicker and in the current market he should be able to pick up some good investments that will form the basis of his next period of sustained outperformance. He’s done just that in the past, notably during periods such as June-October 2001 and January-July 2006. It is difficult to say when today’s equity market will stop being so polarised, but we’re confident that Stuart will be well placed when it does so.
Next up is Tom Walker at Martin Currie, who recently launched the Martin Currie North American Alpha Fund on the back of the success of his core American fund. A fund manager with an enviable track record, Walker’s outperformance historically comes from strong stock selection. His philosophy is that “change” drives stock prices and that through in-depth research, he can identify, evaluate and exploit important changes before others begin to cotton on.
This is just one of four factors he uses in his stockpicking. The other three are: quality, value and growth. The in-house quantitative screening process is used to help focus research rather than just throw out investment ideas. This means the investment approach can be kept simple and transparent. Every one of the 25 stocks in Walker’s portfolio is an actively managed, overweight position that gives him the perfect platform to show off his stockpicking talents.
Our third manager is Charles Richardson, who manages the Veritas Global Income Fund and is one of the pioneers of the international equity-income sector. Richardson runs a concentrated portfolio of around 30 stocks with a focus on absolute return – a security is only bought if it has an attractive stand-alone valuation and is expected to deliver a real return, rather than a relative one.
Richardson also believes it is just common sense to own cash or bonds if he cannot find sufficient equity opportunities – opportunity costs are less expensive than capital losses! All investments are made within a global thematic framework – the location of a stockmarket listing is irrelevant today, given business and capital markets operate on an increasingly global basis. The fund currently yields 4.8%. Performance has been impressive, even in the latter half of 2007 when markets were tough and UK equity income funds, in particular, were struggling.