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

PROMOTED VIDEO
Finacial products from our partners
Property search
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

    Recruitment Genius: Software Development Manager

    £40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

    Ashdown Group: Product Manager - (Product Marketing, Financial Services)

    £30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

    Recruitment Genius: Compliance Assistant

    £13000 per annum: Recruitment Genius: This Pension Specialist was established ...

    Ashdown Group: Market Research Executive

    £23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

    Day In a Page

    Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

    Isis hostage crisis

    The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
    Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

    The runaway buccaneers and the ship full of gold

    Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
    Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

    Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

    Maverick artist Grayson Perry backs our campaign
    Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

    Assisted Dying Bill: 'I want control of my life'

    This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
    Move over, kale - cabbage is the new rising star

    Cabbage is king again

    Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
    11 best winter skin treats

    Give your moisturiser a helping hand: 11 best winter skin treats

    Get an extra boost of nourishment from one of these hard-working products
    Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

    Paul Scholes column

    The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
    Frank Warren column: No cigar, but pots of money: here come the Cubans

    Frank Warren's Ringside

    No cigar, but pots of money: here come the Cubans
    Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

    Isis stands strong as its numerous enemies fail to find a common plan to defeat it

    The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
    Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

    Virtual reality: Seeing is believing

    Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
    Homeless Veterans appeal: MP says Coalition ‘not doing enough’

    Homeless Veterans appeal

    MP says Coalition ‘not doing enough’ to help
    Larry David, Steve Coogan and other comedians share stories of depression in new documentary

    Comedians share stories of depression

    The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
    Has The Archers lost the plot with it's spicy storylines?

    Has The Archers lost the plot?

    A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
    English Heritage adds 14 post-war office buildings to its protected lists

    14 office buildings added to protected lists

    Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
    Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

    Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

    Scientists unearthed the cranial fragments from Manot Cave in West Galilee