Ben Yearsley: You'll never get a bum steer from Artemis UK

The Analyst

I am going to avoid writing in detail about the wider markets this week. Events are moving so quickly that as soon as I write something they have moved on! So, for those still venturing into the markets I thought I would highlight a fund manager with an excellent pedigree who is looking to exploit a range of long-term structural growth opportunities. The manager is Tim Steer, and the fund is Artemis UK Growth.

If you turn the clock back to the early part of this century, one of the major themes for financial markets, apart from the bursting of the dotcom bubble, was major accounting scandals and the collapse of companies such as Enron and WorldCom. What is the relevance of bringing up this ignominious stock market history? Quite simply that one of Mr Steer's unique selling points is his passion for dissecting company accounts looking for dubious practices and numbers that don't add up, essentially avoiding Enrons. Indeed, in his hedge fund (sadly not available to retail investors), he shorts companies where he finds evidence of such accounting shenanigans.

One of his most famous triumphs was Connaught, the property management and environmental services group that went into administration in September 2010. Among the questionable practices, he found that its balance sheet recognised profits from activity that had not yet been fully carried out or paid for. As Connaught's financial position deteriorated in the wake of government spending cuts, there was insufficient cashflow to pay suppliers. The company was eventually put into administration, wiping out shareholders.

Needless to say, this was a very profitable trade for Mr Steer and, although shorting is a risky strategy, he needs only a couple of successful shorts each year to add a tremendous amount of value for his investors. With more than 2,000 companies in the UK to choose from, there will always be suspect accounting somewhere. In this retail fund, Mr Steer can go short with up to 10 per cent of the portfolio, and it can really give him an extra source of returns over his rivals in the sector. Plus, for his long positions he actively avoids what he calls "the high cliff-divers of Acapulco" – companies that sail too close to the wind, hoping things will turn out alright.

Although a UK fund, Mr Steer fervently believes this is a global investment with only 29 per cent of the portfolio by revenue exposed to the UK. Quite simply, he is seeing lots of opportunities in Britain that offer inexpensive exposure to the rapid growth of emerging markets. He also believes UK companies generally have the added benefit of good corporate governance and accounting standards, though clearly there are exceptions!

So what sort of companies is Mr Steer looking at? Examples include Devro, a company making sausage skins, and a beneficiary of the increasing consumption of meat Asia, and Aggreko, a firm with significant emerging market exposure providing temporary power generators.

The top holding, Weir Group, is the world's largest manufacturer of pumps for "fraccing" – essentially extracting oil and gas from rock formations. Mr Steer believes many of his holdings are well protected from any global slowdown as they dominate specific niche areas offering strong growth.

To accompany his forensic accounting approach, Mr Steer calls upon his quantitative system built by Stephen Yiu, the assistant manager of the fund. This looks at a variety of company factors including price-to-earnings multiples, earnings growth, share price momentum and technical analysis. Each stock is scored out of 100 and the system is used to search for new ideas, as well as to sense-check existing ones.

At the end of July, the UK market looked good value, based on our analysis. The recent significant falls have made stocks cheaper still to the point that earnings and dividends would have to fall a good deal to justify it. For investors prepared to venture into the markets and hunt for bargains rather than batten down the hatches, I believe this fund represents interesting way to exploit the varied opportunities in the UK market.

Ben Yearsley is an investment manager at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit www.h-l.co.uk/independent

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Ashdown Group: Trainee Consultant - Surrey/ South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Recruitment Genius: Client Services Assistant

    £18000 - £20000 per annum: Recruitment Genius: A Client Services Assistant is ...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Day In a Page

    No postcode? No vote

    Floating voters

    How living on a houseboat meant I didn't officially 'exist'
    Louis Theroux's affable Englishman routine begins to wear thin

    By Reason of Insanity

    Louis Theroux's affable Englishman routine begins to wear thin
    Power dressing is back – but no shoulderpads!

    Power dressing is back

    But banish all thoughts of Eighties shoulderpads
    Spanish stone-age cave paintings 'under threat' after being re-opened to the public

    Spanish stone-age cave paintings in Altamira 'under threat'

    Caves were re-opened to the public
    'I was the bookies’ favourite to be first to leave the Cabinet'

    Vince Cable interview

    'I was the bookies’ favourite to be first to leave the Cabinet'
    Election 2015: How many of the Government's coalition agreement promises have been kept?

    Promises, promises

    But how many coalition agreement pledges have been kept?
    The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

    The death of a Gaza fisherman

    He built his own reef, and was fatally shot there by an Israeli gunboat
    Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

    Saudi airstrikes are fuelling the Gulf's fire

    Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
    Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

    The only direction Zayn could go

    We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
    Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

    Spells like teen spirit

    A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
    Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

    If fashion is a cycle, this young man knows just how to ride it

    British designer Jonathan Anderson is putting his stamp on venerable house Loewe
    Number plates scheme could provide a licence to offend in the land of the free

    Licence to offend in the land of the free

    Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
    From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

    From farm to fork in Cornwall

    One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
    Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

    Robert Parker interview

    The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
    Don't believe the stereotype - or should you?

    Don't believe the stereotype - or should you?

    We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor