Tom Dobell recently celebrated a decade of running the M&G Recovery Fund. Over that period the FTSE 100 has fallen by 15%, but Dobell’s fund has more than doubled investors’ money. The fund has returned 63.5% over the past five years.
Dobell puts his success down to two main factors. The first is that he focuses on individual shares, rather than economies. “I am not an economist or an accountant; I am a stock-picker. It’s very simple what I do, but the power of compound investment is massive and the returns can be huge if you get it right over time,” he says in The Daily Telegraph. The other key to his success is to hold stocks for far longer than the average fund.
“It’s a big advantage to have an average holding period of five years, compared to about eight months for the typical investment institution.” This approach allows him to “ignore short-term noise in the stockmarket” – which paid off for him with his recent investments in BP. The fund already held some shares in the oil giant, but when the Deepwater Horizon disaster battered the share price, Dobell doubled his holding. His decision to invest when everyone else was panicking has led to a £25m paper profit for the fund.
The fund does “exactly what it says on the tin”, as Mark Dampier of Hargreaves Lansdown puts it. It finds companies that are in trouble but have a good management team who are working hard to turn things around. “The aim is to buy low, when they are being bashed from pillar to post, and then sell high when they have bounced back,” says Dobbell.
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M&G Recovery Fund top ten holdings
| Name of holding | % of assets |
|---|---|
| BP | 5.9 |
| Tullow Oil | 5.5 |
| GlaxoSmithKline | 4.8 |
| Royal Dutch Shell | 4.6 |
| HSBC Holdings | 4.5 |
| Vodafone Group | 3.2 |
| Unilever | 2.7 |
| National Grid | 2.2 |
| First Quantum Minerals | 2.1 |
| Centrica | 2.0 |