Mark Dampier: Backing 'written off' companies can pay, despite the volatility

 

I wrote about the Jupiter UK Growth fund for this newspaper last summer, just after Ian McVeigh celebrated his tenth anniversary as manager. Following another meeting with Mr McVeigh and Steve Davies, the co-manager, last week, I thought it was worthy of another update.

The fund has a strong long-term record, having grown 184 per cent over the past 10 years, against 126 per cent for the FTSE All Share index. Without taking anything away from Mr McVeigh, though, performance has been particularly strong in the past two years, which I believe partly reflects the input of Mr Davies, who was officially named co-manager in January 2013.

Broadly, the managers invest in two types of company: those undergoing a recovery and those they believe are capable of strong growth. The former tend to be companies written off by other investors and often deemed "uninvestable". This immediately causes the pair to sit up and take notice.

They are not afraid to back their favourite stocks with great conviction, and over 90 per cent of the portfolio is invested in just 30 companies. This means each holding has the potential to contribute significantly to performance, but it also tends to make the fund more volatile.

Two-year price targets are set for each stock, which Mr McVeigh believes promotes discipline. This is not to say they will always sell a stock when the target is reached, but it is a signal to review the company and decide if the strong run can continue.

Given the severe UK recession in the wake of the financial crisis, it has not been surprising to see a number of recovery stocks in the portfolio. Dixons has been a notable success. Many thought it was for the scrapheap, suffering from similar problems to HMV. However, the recession saw off competitors such as Comet, giving Dixons the chance to increase its market share. Price cuts and service enhancements also helped and the share price has more than trebled since the mangers first purchased them around three years ago.

The fund's hefty exposure to the UK banking sector has also worked well of late. Lloyds, now the fund's largest position, was purchased in 2010. Initially, this proved painful, but the fund took advantage of share price weakness to increase its exposure. Over the past couple of years that stance has paid off, as sentiment towards the company has markedly improved.

Growth companies tend to be those the managers believe can grow sales at least in line with nominal GDP over a three-year period, which would currently equate to sales growth of around 6 per cent over three years.

Examples of growth stocks held in the portfolio are the information services company Experian, which Mr McVeigh describes as having massive barriers to entry, and the German car giant BMW.

Around 9 per cent of the portfolio is held in cash, which is not necessarily unusual. Mr McVeigh believes valuations are less compelling than they were in early 2012 and, rather like me, felt there was too much optimism in the air at the beginning of this year. The cash gives them the firepower to pounce when they see opportunities.

This fund is likely to suit long-term investors looking for a focused portfolio. This will lead to greater volatility and the fund's performance will differ markedly from the stock market at times. It is a genuine stock-picking fund, though, and one that I believe has been consistently under-rated.

Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit www.hl.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Arts and Entertainment
books
News
Dr Alice Roberts in front of a
people
Voices
Nigel Farage arrives for a hustings event at The Oddfellows Hall in Ramsgate on Tuesday
voicesA defection that shows who has the most to fear from the rise of Ukip
Arts and Entertainment
The Doctor and the Dalek meet
tvReview: Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
PROMOTED VIDEO
Sport
Diego Costa
footballEverton 3 Chelsea 6: Diego Costa double has manager purring
Arts and Entertainment
The 'three chords and the truth gal' performing at the Cornbury Music Festival, Oxford, earlier this summer
music... so how did she become country music's hottest new star?
Life and Style
The spy mistress-general: A lecturer in nutritional therapy in her modern life, Heather Rosa favours a Byzantine look topped off with a squid and a schooner
fashionEurope's biggest steampunk convention heads to Lincoln
Voices
Caustic she may be, but Joan Rivers is a feminist hero, whether she likes it or not
voicesShe's an inspiration, whether she likes it or not, says Ellen E Jones
News
i100
Arts and Entertainment
Star turns: Montacute House
tv
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Arts and Entertainment
Unsettling perspective: Iraq gave Turner a subject and a voice (stock photo)
booksBrian Turner's new book goes back to the bloody battles he fought in Iraq
News
i100
Arts and Entertainment
Some of the key words and phrases to remember
booksA user's guide to weasel words
Life and Style
Brave step: A live collection from Alexander McQueen whose internet show crashed because of high demand
fashionAs the collections start, Alexander Fury finds video and the internet are proving more attractive
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

    Law Costs

    Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

    Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

    £35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

    DevOps Engineer (Systems Administration, Linux, Shell, Bash)

    £50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

    Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

    £60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

    Day In a Page

    The other Mugabe who is lining up for the Zimbabwean presidency

    The other Mugabe who is lining up for the Zimbabwean presidency

    Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
    The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

    The model for a gadget launch

    Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
    Alice Roberts: She's done pretty well, for a boffin without a beard

    She's done pretty well, for a boffin without a beard

    Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
    Get well soon, Joan Rivers - an inspiration, whether she likes it or not

    Get well soon, Joan Rivers

    She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
    Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

    A fresh take on an old foe

    Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
    Fashion walks away from the celebrity runway show

    Fashion walks away from the celebrity runway show

    As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
    Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

    Meet the stars of TV's Wolf Hall...

    ... and it's not the cast of the Tudor trilogy
    Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

    Europe's biggest steampunk convention

    Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
    Don't swallow the tripe – a user's guide to weasel words

    Don't swallow the tripe – a user's guide to weasel words

    Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
    Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

    Daddy, who was Richard Attenborough?

    The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
    She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

    Kacey Musgraves: Nashville's hottest new star

    The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
    American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

    Soldier-poet Brian Turner on his new memoir

    James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
    Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

    Villa were not surprised that Vlaar was a World Cup star

    Andi Weimann reveals just how good his Dutch teammate really is
    Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

    Bill Granger's simple Italian salads

    Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
    The Last Word: Tumbleweed through deserted stands and suites at Wembley

    The Last Word: Tumbleweed through deserted stands and suites at Wembley

    If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution